Lords Sitting of 23 March 1981

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Southwell.

Civil Service Pay and Conditions
The Earl of Kinnoull: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is the real annual increase in salary being offered in the current Civil Service pay negotiations; how comparable are the annual holiday and sick leave allowances to civil servants with those granted to persons of equivalent seniority in industry; and what is the anticipated inflation-proof pension of a civil servant who currently earns £7,000 a year and who is due to retire in 20 years' time.
The Minister of State, Treasury (Lord Cockfield): My Lords, the increase in salary being offered in the current Civil Service pay negotiations is 7 per cent. The annual holidays of non-industrial civil servants are broadly comparable with those given by good employers of similar staff in outside industry and commerce. Where there are differences, these are taken into account in Civil Service pay levels. On the question of sick leave allowances, there are no comprehensive data on outside practice in a form which can readily be set against Civil Service arrangements. It is not possible to estimate what will be the pension of a civil servant who is due to retire in 20 years' time. It will depend on the level of his salary in the year 2000.
The Earl of Kinnoull: My Lords, I thank my noble friend for that full reply. Having regard to the benefits under the conditions of contract of the Civil Service, will my noble friend agree that the Government current offer is fair and reasonable? The present industrial action, notably at Gatwick airport at the weekend, is irresponsible and deplorable, and does nothing to add to the case or stature of the Civil Service. Finally, the index-linked pension scheme, which I believe has no parallel in industry, has a very real measurable benefit when evaluating the Civil Service contract.
Lord Cockfield: My Lords, I agree with what my noble friend says about pay and conditions in the Civil Service. In looking at these matters it is only right to bear in mind that in the last two years pay in the Civil Service has increased by approximately 50 per cent. Against that background the present offer of 7 per cent. is in fact a very fair one. So far as the second part of my noble friend's supplementary question is concerned, I think that we all deplore inconvenience inflicted on the public, and we hope that it
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will soon be brought to an end. With regard to the third part of the supplementary question, the inflation-proof pension is of course a very valuable addition to Civil Service remuneration.
Lord Leatherland: My Lords, while the Government are considering improving the pay and allowances of that particular group of public servants, can the noble Lord think of another very dedicated group of public servants to whom an increase would also be welcome?
Lord Cockfield: My Lords, I think all I can say is that I will certainly consider the remarks made by the noble Lord. I believe that what he has said is not unassociated with a Question that was asked recently in your Lordships' House, to which a reply was given by my noble friend the Leader of the House.
Lord Hale: My Lords, can the noble Lord say what the Government mean, or what he means, by a "good" employer? Is it not a fact that the present Government have constantly been appealing to employers not to give wage increases or any increase in benefits to employees, in order to save the nation?
Lord Cockfield: My Lords, I certainly would not agree with the implications contained in the noble Lord's supplementary question. All employers, whether in the public sector or the private sector, need to pay full regard to their ability to pay in the present difficult circumstances, and it is only right that the Government should draw attention to that fact and should pay regard to it in negotiations with their own employees.
Lord Peart: My Lords, may I ask the noble Lord whether his strictures apply to the industrial civil servants, who in reality form a large part of the Civil Service?
Lord Cockfield: My Lords, I was totally unaware that I had made any strictures in regard to anybody. In fact, I took very great care not to do so, and I hope that the noble Lord will join me in taking that approach to this difficult problem. So far as the present pay negotiations are concerned, they relate of course to the non-industrial Civil Service.

Madagascar: British Ambassador's Accommodation
2.42 p.m.
Lord Merrivale: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what accommodation is currently provided for the British Ambassador to Madagascar and his staff, and whether in the longer term it is proposed to provide the Ambassador with a residence in keeping with his status, role and duties.
The Earl of Avon: My Lords, the United Kingdom-based staff of the embassy in Madagascar consists of the Ambassador and a Second Secretary. They work in a rented office, and both the Ambassador and the Second Secretary live in rented houses. We are by no means satisfied with the house that serves as the Ambassador's residence, and we accept that it is too small to enable the Ambassador to fulfil his representational duties adequately. We see it as purely a temporary residence, pending acquisition, by purchase or leasing, of a more suitable property.
Lord Merrivale: My Lords, I am grateful to my noble friend for his understanding on this problem, which is an urgent one. First, may I ask whether the Diplomatic Service's inspectors, who visited the mission this month, reported on this question? Secondly, in view of the difficulty in finding accommodation of a high enough calibre, will consideration be given to the building of a residence on a plot of land of an area of 7,221 square metres, owned by Her Majesty's Government in Antananarivo?
The Earl of Avon: My Lords, as my noble friend is aware, the property situation in this area is at the moment very difficult. I am not aware of the visit he has mentioned, but the estate surveyor's office is keeping this carefully in view. As regards the land we own, it is our intention to sell and the land is on the market. However, building is so costly that the general market in land is very depressed. Perhaps, however, that is not entirely disadvantageous, as it leaves a building option open if we should have to use it.
Lord Goronwy-Roberts: My Lords, does the Minister agree that there might be fairly general support for any moves that the Government found feasible to strengthen our diplomatic representation in Madagascar, and generally in that part of the world, in view of the strategic importance of Madagascar and its potentially great economic and commercial importance to this country?
The Earl of Avon: My Lords, I am very grateful to the noble Lord for his remarks, and of course I agree with him. For the information of noble Lords, I am replying to this Question on behalf of the Department of the Environment, rather than the Foreign and Commonwealth Office.
Lord Brockway: My Lords, is the Minister aware that many of us have heard with astonishment his statement that our Representative in Madagascar is placed in these limited circumstances? Is it not the case that, not only for its large population and potentialities but also for its strategic position between Southern Africa and Mauritius, Madagascar is so enormously important that we should be adequately represented there?
The Earl of Avon: My Lords, I am sure the House would agree that there is no question but that we are adequately represented by our Ambassador there at the moment. If I can come back to the housing problem, which is what the original Question was about, there is a considerable scarcity. Apart from the demand
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generated by the Malagasy government service, no fewer than 15 new embassies have been opened and they all compete for the few available properties. Very few suitable houses have been built since the present régime took over in 1972, though some are now being built, and this is the problem which we now have.
Lord Merrivale: My Lords, may I ask my noble friend one final question? Can he tell me why the negotiations fell through for the renting of a brand new, most suitable residence in May last year in the Fort Duchesne area just outside Antananarivo?
The Earl of Avon: My Lords, I do not think I can give my noble friend the exact answer to his question, but during the period from March 1979 right up to the present day a considerable number of properties, both for renting and for purchase, have been looked at. All of them have fallen through for various technical reasons and not for reasons to do with Her Majesty's Government's policy.

No. 16 Prince's Gate
2.46 p.m.
The Earl of Kinnoull: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether 16 Prince's Gate is a listed building; whether the owners intend shortly to restore it; and whether a dangerous structures order is being contemplated in view of the building's present condition.
The Earl of Avon: My Lords, No. 16 Prince's Gate, which is the former Iranian Embassy, is a Grade II listed building. It was of course damaged following the rescue operations last year. I understand that the Westminster City Council have served a dangerous structures notice on the owners and have erected temporary scaffolding. However, the city council have not yet received any firm proposals from the owners for the restoration of the building.
The Earl of Kinnoull: My Lords, while thanking my noble friend for that reply, may I ask him whether he would agree that it is a very unsatisfactory situation that this listed building, one of a terrace of listed buildings, should remain in a dangerous structural condition for over 10 months; and that if the owner had been anything other than an embassy the compulsory repair powers would have been invoked by now? Can my noble friend say whether his department is now in direct touch with the embassy and is pressing for an early undertaking to repair, and what reaction he is receiving?
The Earl of Avon: My Lords, I think my noble friend goes too far in what is a quite exceptional situation. I understand that an informal approach has been made to the local planning authority by the agents acting for the Iranians. Westminster City Council have informed them that they wish to see the

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building restored to its former state. Obviously, this is something in which we are all interested, but it will take time.
Baroness Birk: My Lords, while appreciating the special circumstances of this case, and also being only too well aware of the problems raised by diplomatic immunity and the natural desire of the Foreign Office not to offend foreign missions, but in view of this and what has happened recently to the Chinese Embassy in Portland Place, will the Government indicate that they will take steps to ensure that foreign Governments will not be allowed to continue to flout the building controls which apply to all other citizens? I appreciate that this is a difficult situation faced by all Governments, but it is getting rather serious.
The Earl of Avon: My Lords, I am grateful to the noble Baroness for the terms in which she asked that question. Perhaps I should put on record the facts about the Chinese Embassy's properties. In October 1973 the then Secretary of State granted outline planning permission and listed building consent for the partial demolition of these buildings, and for the erection of a new embassy behind the existing facade. Detailed planning permission was granted in October 1978, and these consents in fact provoked little comment at the time. However, when demolition work began towards the end of last year the district surveyor became very concerned about the structural condition of the main facades, and on the basis of his report Westminster City Council gave permission for them to be taken down in the interests of public safety. I assure the noble Baroness that the Government are looking at the overall situation, and will keep a close eye on it.

School Textbook Provision
2.49 p.m.
Baroness David: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they intend to take about the provision of school textbooks by parents.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, my right honourable friend the Secretary of State for Education and Science welcomes the contributions made by many parents towards the provision of additional books for schools. He recognises that, nationally, there are grounds for concern about the levels of book provision in some schools. That is why the Government's public expenditure plans allow for a cumulative 2 per cent. annual increase in local authority spending on books and equipment—a growth of 8 per cent. in real terms by 1983–84.
Baroness David: My Lords, while I thank the noble Lord for his reply and appreciate that parents have always made some contribution to some schools, will
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the noble Lord please direct his mind to the Question, which was specifically about textbooks? I have evidence in my hand of schoolchildren being asked to provide textbooks for examination classes and so on, and I am also aware that the noble Baroness, Lady Young, was made aware of this as long ago as last October. May I have information on the action that the Government intend to take about textbook provision by parents?
Lord Belstead: My Lords, I see nothing wrong in parents contributing towards the cost of additional hooks, provided that contributions are made on a genuinely voluntary basis and provided that the local education authorities are fulfilling their duty under Section 8 of the Education Act 1944.
Baroness Bacon: My Lords, would not the noble Lord agree that this practice will I create an invidious distinction within the schools between those children whose parents can afford to provide books and those whose parents cannot afford to buy them?
Lord Belstead: My Lords, it is precisely because the Government share the kind of concern expressed by the noble Baroness that, after a considerable period of falling expenditure on books in schools, the Government, are, as I said in my original reply, now making provision in the rate support grant for a growth in real terms of 8 per cent. on this spending, if the local authorities see fit to do so, by 1983–84.
Baroness Gaitskell: My Lords, does this not really amount to stealing from the next generation? Is that not what we are doing?—nibbling away all the time, asking the parents to produce books, losing teachers. Everything the Government are doing is actually harming the growing generation of young people.
Lord Belstead: My Lords, I was seeking in my replies not to bring a political element into this but when the noble Baroness, Lady Gaitskell, says that everything the Government are doing is leading to a situation which gives all of us cause for concern, then I must repeat what was said by my right honourable friend the Secretary of State (in column 448 of Hansard of 5th March), when Mr. Carlisle reminded the House of Commons that spending on books under the previous Government went down in every single year; so that by the end of the previous Government's tenure of office the spending on books was 33 per cent. less in 1978–79 than in 1972–73.
I do not conceal from the noble Baroness that, in addition to that, there has as a matter of fact been a reduction in spending on books last year at a time when the present Government were responsible. I accept that. It is because of this cumulative trend which has gone on that the Government have now made provision for an increase in expenditure on books between now and 1983–84.
Lord Avebury: My Lords, would not the Minister recognise that the parents of children who are not able to afford textbooks are the same people as are much less likely to have books at home for the children to read; so that these children will be doubly disadvantaged

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and unable to compete with their contemporaries when they come to the harsh world of work? Does not the Minister agree that this pitifully small increase now announced will go nowhere towards meeting this class distinction that the Government are imposing in the schools?
Lord Belstead: My Lords, if the noble Lord had any responsibility for public expenditure, I do not think that he would call a 2 per cent. increase, cumulative over four years, pitiful.
Lord Donaldson of Kingsbridge: My Lords, is the noble Lord aware that the only alternative to the Department of Education and Science buying books or the parents buying books is the public libraries; and that the Library Association is much concerned about its present position? Can he give any reassurance that there will not be severe cutbacks by the libraries in total expenditure on books?
Lord Belstead: My Lords, I cannot give the noble Lord the assurance he requires. All I can do is to refer the noble Lord to the White Paper published on 10th March. However, I repeat that I think that the provision which is being made in rate support grant, which bears directly upon the problem referred to in this particular Question, is something which should have some effect.
Baroness David: My Lords, may I ask a final question? Does the Minister believe that because the money is put into the rate support grant for this purpose it will be spent for this purpose?—because the same thing happened about the in-service training. How are the Government to monitor that?
Lord Belstead: My Lords, so far as the question of monitoring is concerned, as the noble Baroness knows, the figures come in annually, and that allows everybody to see what expenditure has occurred. It is a fact known from these figures that over recent years, whereas expenditure on equipment in schools has gone up, relative spending on books has not. It will be possible to monitor what is happening from the figures.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Ferrers will, with the leave of the House, repeat a Statement to be made in another place on the foot and mouth disease outbreak.
It may be for your Lordships' convenience if I announce that dinners will be available this evening. Subject to the progress of the Committee stage of the Companies (No. 2) Bill, the House will adjourn for approximately one hour. The Prevention of Terrorism (Temporary Provisions) Act 1976 (Continuance) Order 1981 will be taken during this adjournment.
I think I should also tell your Lordships that the Committee stage of the Interpretation of Legislation Bill, standing in the name of the noble and learned
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Lord, Lord Scarman, will now be taken on Thursday of this week, 26th March, after the Report stage of the Supreme Court Bill, and not tomorrow, Tuesday, 24th March.

English Industrial Estates Corporation Bill [H.L.]
Read 3a, and passed, and sent to the Commons.
Public Passenger Vehicles Bill [H.L.]
Read 3a, and passed, and sent to the Commons.

Companies (No. 2) Bill [H.L.]
2.59 p.m.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Trefgarne.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 123:
After Clause 41, insert the following new clause:
("Disclosure of substantial individual Interests in share capital carrying unrestricted voting Rights: parties acting in concert
.—(1) The Secretary of State may by regulations made by statutory instrument make and from time to time vary such provisions as appear to him to be appropriate for ensuring that the obligation of a person under section 33 of the 1967 Act (obligation of persons to notify company of acquisition, changes in amounts of, and disposal of shares in the company carrying unrestricted voting rights) shall apply to any one or more persons who are (or, under such regulations, are deemed to be) acting with a common purpose as if such one or more persons were a single person.
(2) Regulations under this section may make different provisions for different cases or classes of case and may contain such incidental and supplementary provisions as the Secretary of State thinks fit.
(3) No regulations shall be made under this section unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament.").
The noble Lord said: I beg to move an amendment concerning the secret dealing in shares which has caused so much anxiety in the City of London in recent months. This amendment is intended to deal with that problem satisfactorily in so far as it seems to us on these Benches and to many organisations at present in the City who have indicated to me that the scope of this amendment is adequate for the purposes of dealing with the problem expeditiously.
Under Section 33 of the 1967 Companies Act it is incumbent on people to disclose their holding of shares with unrestricted voting rights if their quantity of shares amounts to 5 per cent. of the total paid-up capital of

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the company. However, now there are many persons who though individually they do not own more than 5 per cent. of the shares, they work in concert and, in a non-legalistic way, together they are able to get more than 5 per cent. control over the shareholding of the United Kingdom company. This can be a very serious matter. The company does not know who holds these blocks of shares. It may be embarrassing to a United Kingdom company to have foreigners owning shares—particularly a large holding of shares—in a company, and nobody knows who they are. This is particularly so when companies have defence contracts.
The problem was brought to light in a strong way in the case of Consolidated Gold Fields. Members of the Committee may have seen recently in the press that the Dunlop Company were worried that something like 30 per cent. of their shareholding was held in the Middle East by persons unknown to them. There have been two or three other cases brought to notice recently, but in some cases no press announcement has been made about the problem.
Where these people act in concert—we call them, in the jargon of the law, "concert parties"—this amendment is intended to force a disclosure of who holds more than 5 per cent. of the shares or to give powers to the Secretary of State, if necessary, to limit the voting rights of those who do not disclose their identity in relation to their shareholdings when those become over 5 per cent.
I should also like to speak to my Amendment No. 152. The scope of the amendment is this: it is well known that it will be very difficult indeed to recite in a statute all the detailed ways in which these "concert parties" can act. It seemed to us that the best way to deal with the problem was to give the Secretary of State power to introduce a regulation when a problem of this kind was brought to his notice. The facts, as I say, differ from case to case. The matter can then be dealt with by regulation.
I am always reluctant to suggest that government should be by regulation; but this is a case of such urgency and seriousness, and the variety of cases is almost infinite, that regulation would be justified. This is subject of course to the safeguard which I have included in subsection (3) of my amendment that no regulation shall be effective unless it is passed by both Houses. That would give the protection that a lot of us would find satisfactory in this problem of dealing with regulation.
There is a statement in the Financial Times this morning that the Government may be introducing some measures regarding the amendment that I have proposed. At Second Reading nearly a month ago (at col. 1174 of Hansard for 26th February) I explained fully what I proposed to do in the Committee stage. My amendment was one of the first amendments put forward. The Government have had three to four weeks to consider the basis for this amendment that I set out so fully in the Second Reading.
The Financial Times were good enough to refer to me; but they made a great mistake. They referred to me as a Labour Peer. May I say publicly now—in case it is not known in all parts of the Committee—that I am and have always been a Liberal Peer. Now that I am presuming before the Committee to correct statements in the Financial Times, may I say that last
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week, when they were dealing with my amendment, which I succeeded in passing through this Committee regarding business names, they referred to me as a solicitor. I am not sure what course a silk at the Patent Bar who has been referred to as a solicitor and a Labour Peer should take in the future. That will be no doubt considered at a later stage.
I do not think it is necessary for me to speak in greater detail except to say once again that it is very difficult to define in a statute the actions of these people who are acting in concert. There are so many variations of it. No doubt it could be defined but I am sure that a number of people could escape the conditions in the statute. I therefore suggest that power be given to the Secretary of State to introduce a regulation to deal with a specific problem, subject always to the fact that the regulation would not be effective unless it had been passed by both Houses. I beg to move.
3.7 p.m.
Lord Seebohm: I confess that I am puzzled. I fully agree with Lord Lloyd's motives but there are three amendments which seem to have precisely the same objectives; Amendments No. 123, 125 and the amendment in my name, No. 139. The amendment I am putting forward has been approved and is strongly recommended by the Council of Securities Industries, which is the watchdog in the City for these matters. I have also had a letter from the chairman of the Stock Exchange saying that he is strongly in favour of the amendment in my name. I wonder whether these amendments should be taken together or whether the Government have a view as to which is the best one. If we pass this amendment do we automatically cancel the other two?
Lord Trefgarne: If I may respond to the noble Lord, Lord Seebohm, without any disrespect to the noble Lord, Lord Lloyd, if the Committee is persuaded by the arguments that I shall seek to deploy, I hope that noble Lords who have similar if not identical amendments will not seek to move them when we get to them later.
Lord Lloyd of Kilgerran: I am sorry to interrupt the noble Lord so early in his speech, but the other amendments are not identical. They are not so broad as my amendment. They attempt to deal with the matter more specifically. Although the basic theme is the same, they are not identical. Opinions of course differ as to which is the best amendment. I was telephoned this morning by some high person in the Stock Exchange who supports my amendment as against Lord Seebohm's amendment.
Lord Trefgarne: If I may say what I have to say and then if noble Lords who have other amendments on the Marshalled List are not satisfied, they may deploy their arguments when we come to their amendments. May I first congratulate the noble Lord, Lord Lloyd, on the ingenuity of his attempt to deal with the problem of "concert parties". Sensitive to the concern expressed by the Government about the burden which the Bill even in its present form will impose on your Lordships and on the other place, the noble Lord suggests that

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the Secretary of State should be able to deal with this matter by secondary legislation. I have to say, first, that the Government do not consider that it would be appropriate to deal with a matter such as this by regulations. Quite apart from the sensitivity and significance of the policy issues that so-called "concert parties" raise, subjecting them to disclosure requirements would involve an important extension of the application of criminal penalties in this area. It cannot, in the Government's view, be right to make such an extension in a manner which does not provide for full parliamentary scrutiny by burying the new offence away in secondary legislation that will not be evident on the face of the Act.
If one were, nevertheless, tempted to follow the noble Lord's approach, I fear his clause is too imprecisely worded. I have in mind, for example, the words "acting with a common purpose". What does "acting" mean? Acting to acquire? Or acting, having acquired? Acting in what way—by voting together? Exercising rights together? The noble Lord may say that these are matters for the regulations. But the regulations must be within the scope of the power, and this power is, as I say, far too imprecise to provide a sound foundation for future action.
However, the Government do not have a negative approach to these matters. We noted carefully the references in the Second Reading debate to the omission from the Bill of provisions to tighten up the law on the disclosure of interests in shares. We have always recognised that there are problems about the effectiveness of the present law and the Committee knows that we have given very full consideration to the subject over the last year. This Government, like any Government, can only bring forward so much legislation at any one time, and we were forced to the conclusion, reluctantly, that this subject could not be dealt with in this Bill. We recognised that this would cause disappointment, but felt that we had no alternative.
Since the debate on the Second Reading we have reviewed the position with particular reference to the parliamentary time available. I am pleased to inform your Lordships that the Government now consider that they will be able to bring forward their own proposals. I cannot promise at what point in the progress of the Bill through Parliament we shall be in a position to do so. These are difficult and complex matters, as the noble Lord, Lord Lloyd, recognised, but we shall bring forward proposals as soon as we can. Nor am I able to comment at this stage, I regret, on the nature of the proposals and provisions which the Government will bring forward. What I can say is that they will deal with so-called "concert parties" and, on that basis, I invite the noble Lord to withdraw his amendment.
Lord Lloyd of Kilgerran: I am now at a complete loss as to what course the Government are proposing to take. I understand that they are going to bring forward their own proposals, having regard to the indication in the Second Reading debate of the problems that we on these Liberal Benches were attempting to deal with by amendments. May I ask the noble Lord the Minister whether he proposes to bring new
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clauses into this Bill? I do not see the noble Lord, Lord Boyd-Carpenter, in his place but on several occasions he has commented on the structure of this Bill. May I therefore ask the Minister: is he proposing to bring forward by 6th April—that is, by Report stage—new clauses to the Bill? Or is he saying that your Lordships will not have the opportunity of considering amendments to the Bill in this Chamber but that amendments to the Bill will be produced in the other place? If so, that appears to raise a constitutional matter with which I am not capable of dealing; but it savours to some extent, quite bluntly, of discourtesy to this Chamber if the Government are not producing amendments in this Chamber and are now saying deliberately that the amendments will be brought forward in another place when and if the Bill gets there.
Lord Wedderburn of Charlton: May I intervene before the noble Lord replies so that he can perhaps deal with all the points raised at the same time. The noble Lord, Lord Lloyd, has surely raised a matter of very great importance in relation to the way in which company law appears to be made under this Administration in the legislature. The last Companies Bill went through your Lordship's House with a certain girth and then expanded to twice its inches in another place. This Bill has now had made to it perhaps one of the most important additions in company law for a century; namely, that which reverses the rule in Trevor v. Whitworth to allow companies to purchase their own shares. When the noble Minister speaks about lack of parliamentary time, I recall one evening last week when 16 pages of fundamental amendments to our company law went through the Committee in, I believe, 40 minutes after dinner. There was plenty of time to deal with his new clauses then. When the noble Lord says it is all terribly difficult because one cannot define "acting for common purposes", may I point out that there are three or four easy references for him to note in other statutes which use very similar phrases—for example, in the Industry Act.
What is holding the Government back? Why is it that on company law we always get a Bill which begins by looking as if it is about A, B and C, but then in Committee stage it begins to be about D and E, and by the time it gets to another place it has become W, Y and Z? This is a very difficult area of company law legislation—an area which is highly political, contrary to the belief of most people, and an area where public policy is absolutely fundamental—and this amendment of the noble Lord, Lord Lloyd, is fundamental to disclosure philosophy, to society and to company law. Is it that the Government cannot make up their mind what to do in this area? The difficulty cannot be the technicalities of defining "acting with a common purpose" and it cannot be lack of parliamentary time, at least not just at the moment. What is holding the Government back?
There is a clear call from all sides of British society for legislation regarding persons acting in concert and the amendment which is in my name, and the names of my noble friends Lord Ponsonby and Lord Bruce, is a supplement to this one, and in one respect also to the one of which the noble Lord spoke earlier. Surely the Government can at least give us some idea

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of the substance of what they are about to propose? Can they tell us at least the vague lines of the structure of the legislation they propose on "concert parties"? If so, then perhaps in speaking to our amendments we could have a worthwhile debate in a genuine attempt to help the Government to bring forward points which would be relevant to the structure. But if we do not know the structure of their thinking, we shall be debating amendments which are more or less in the air.
Lord Trefgarne: I think the hall mark of the Government's response to the points made in Second Reading of this Bill is one of flexibility. Instead of maintaining dogmatically the hard line that we were not in any circumstances going to proceed with the introduction of the control of these "concert parties" to which the noble Lord's amendment refers, we considered very carefully all that was said and came to the conclusion, in the light of a reassessment of the parliamentary time available, that it would, after all, be possible to deal with this matter.
The Government have long acknowledged that the problem of "concert parties" was a difficult one and that it was a question of when we could get the appropriate provisions fitted into the legislative programme. Now an opportunity has presented itself, and we have been constrained to look particularly carefully at the legislative timetable, having regard to the very strong feelings that were expressed by your Lordships during the Second Reading of this Bill.
I am sorry it is not yet possible to tell your Lordships precisely what it is that we have in mind in this matter, because the details of the clauses that we shall be tabling are not yet available. I cannot give an undertaking that these clauses will necessarily be tabled in this Chamber. I hope it will be possible to do that, but it is simply a question of whether we can get them properly drafted in time. If that is not possible, then I fear they will have to be tabled when the Bill goes through another place; and if that is necessary that is what will be done. I regret that these amendments cannot be brought forward now, but that is simply not possible within the constraints of the parliamentary draftsmen and, indeed, of the other persons involved. I hope that your Lordships will be satisfied with the assurance I have given, that we shall deal with this problem in this Bill just as soon as we can.
3.20 p.m.
Lord Campbell of Croy: The noble Lord, Lord Lloyd of Kilgerran, is to be congratulated on having had the effect on the Government of their saying that they will be bringing forward amendments to meet this point, and the points of other noble Lords such as the noble Lord, Lord Sebohm, who have been concerned with this matter. Like my noble friend, I hope that it will be possible for these amendments to be introduced into your Lordships' House—if they can be drafted in time—rather than into another place. But the fact that the Government are responding to these amendments, and will produce a formula which one hopes will meet all the problems, means, I think, that the principle has been accepted.
The noble Lord, Lord Wedderburn, raised what sounded like a constitutional point and I should just
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like, for a moment or two, to point out that this has happened on several occasions in recent years in your Lordships' House, in which I was involved, as was the noble Lord, Lord Lloyd, To illustrate the point, major amendments to a Transport Bill were suggested by me from the Front Bench opposite about three years ago. It was not possible for the noble Lord, Lord Harris, who was dealing with that Bill, to get them in in time in your Lordships' House, but enormous additions were made which we welcomed in another place and then came back here. I kept bobbing up from the Bench opposite thanking the noble Lord, Lord Harris, for about 20 amendments which came through, which had really been the result of an initiative taken in this House. So that is one alternative. We were quite pleased with the results, but we had no opportunity to discuss them except as amendments. We could not amend Commons amendments.
To put it another way, I remember when the Energy Bill was going through this House in 1976. On that occasion, we were able to convince the Government—it was the noble Lord, Lord Kirkhill, who was then dealing with the Bill from this Front Bench—that their Bill as originally drafted needed considerable amendment. The whole Bill was completely transformed in your Lordships' House. That deprived the other House of an opportunity to see the original proposals of the Government. So that is the situation in another form. By changing a Bill a great deal in your Lordships' House—in that case, it was the Energy Bill—the other House had no opportunity to consider the original proposals, because the Bill was completely transformed by the time it reached another place.
So I would remind your Lordships' House, particularly in regard to what the noble Lord, Lord Wedderburn, said, that we can have a considerable effect on legislation. Sometimes it operates in the sense of depriving another place of a chance of considering the Government's original proposals, and in other cases it deprives us of a chance of considering in detail amendments which have been introduced as a result of our initiative, before they come back to us.
Lord Ponsonby of Shulbrede: As has been said by previous speakers, this is an unsatisfactory situation which has characterised the whole progress of this Bill through this House. As my noble friend Lord Wedderburn said, we had a whole series of amendments tabled just before the start of the Committee stage and, certainly, we are far from satisfied with the position as it exists today. In making this statement the noble Lord, Lord Trefgarne, no doubt hoped that he would be saving a considerable amount of your Lordships' time, but in view of the woolliness of his statement T think your Lordships will want to debate in detail today some of the amendments which have been tabled on this subject. Indeed, I believe that the view of the Committee on these various amendments could help to crystalise the Government's views before they table their own amendments.
Lord Trefgarne: That is one view though, I must say, not one that I share. I had, indeed, hoped that the assurance that I have given, which is a very clear one, to the effect that we will, as soon as maybe, table amendments to deal with the problem which noble Lords

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have identified—which has, indeed, troubled the Government for some time, but which has only now found a place in the legislative programme—if not in your Lordships' House, then in the other place, would have satisfied your Lordships. Incidentally, w hen and if such amendments are agreed in another place, it is not the case that when they come again to your Lordships they have to be accepted or rejected. They can be considered and, indeed, further amended, if that is what your Lordships wish. But I should have hoped that the assurance that I have given would have satisfied your Lordships on the principal points which lie at the heart of some of the following amendments. None the less, those amendments must take their chance when we come to them. For the moment I hope that the noble Lord, Lord Lloyd of Kilgerran, will not press this one.
Lord Lloyd of Kilgerran: May I thank the noble Lord, Lord Campbell of Croy, for his very kind words about the potential effect of my amendment upon the Government's attitude in this Bill, perhaps in another place. I am grateful for the support of the noble Lords, Lord Wedderburn and Lord Ponsonby, on this matter. As the noble Lord, Lord Trefgarne, is becoming increasingly reasonable, if I may presume to say so, as he speaks to your Lordships on this very important and difficult matter—and I am not raising here the acrid atmosphere of party controversy; we are all seeking to do our best, and I am seeking to do my best in a humble way to be of some help, if that is not too pompous an expression to use at this stage—may I try two other matters on the noble Lord?
Would the noble Lord the Minister be able to produce a draft amendment within the next two or three days, on which we could then have a reasonable debate? I fully realise the difficulties of parliamentary counsel and the pressures upon them, but, after all, this is recognised as an important matter. Therefore, I ask: would it be possible to get a draft amendment in the next two or three days, so that we could get some structure into a debate on the matter, with the expertise of your Lordships, on Report?
Secondly, would it be possible, in view of the complexity of the timetable of the Government, to postpone the Report stage of this Bill until the first week in May, after the recess, which will give us all the opportunity of getting expert advice on all these important matters, including the clauses to which the noble Lord, Lord Wedderburn, has referred, regarding the purchase by a company of its own shares? I make those two suggestions in the hope that they may be helpful to the Government.
Lord Trefgarne: With regard to the first point that the noble Lord raised, as to whether it would be possible to produce draft clauses or draft amendments at some stage for your Lordships' consideration before this Bill leaves your Lordships' House, even if those amendments were not in a form that could be formally added to the Bill, I am not certain that that is a procedure that has ever occurred in the past. However, I think it is one that, on this occasion at least, deserves some attention. I can give no assurance on it, but I will look into the matter and see whether it is possible to
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give your Lordships some indication of what is proposed before this Bill leaves your Lordships' House.
On the second point, of postponing the Report stage of this Bill, that is a matter for the usual channels and not for me. On the other hand, I can imagine that if we were to do that it would create considerable difficulties in the other place, where, of course, their programme is even tighter than ours.
Lord Lloyd of Kilgerran: I do not want to waste the time of your Lordships in this matter. As your Lordships will see, the noble Lord, Lord Trefgarne, has been most reasonable, particularly in his last speech. Having regard to the assurances that I have now been given, I do not propose to press this matter to a Division now, but I reserve whatever rights there are to me at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.29 p.m.
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 124:
After Clause 41, insert the following new clause:
("Amendment of s. 54 of 1948 Act
. Section 54 of the 1948 Act (prohibition on companies' providing assistance for purchase or subscription of own shares) shall not prohibit a company from doing anything if (a) the purpose or principal purpose is not to provide any financial assistance for the purchase or subscription of any shares in the company or if it is a subsidiary, in its holding company; or (b) if the directors, having regard to their principal intentions with respect to the management of the company's business during the year immediately following and to the amount and character of the financial resources which will in their view be available to the company during that year and, after making full inquiry into the affairs and prospects of the company, are of the opinion that the company will be able to continue to carry on business as a going concern throughout that year and have made a statutory declaration to that effect.").
The noble Earl said: I am moving this amendment, first, at the request of the Law Society of Scotland. However, I have now been informed that the London Clearing House Committee give this amendment its full-hearted support. That is the chairman of Lloyds Bank, the chairman of the National Westminster, the chairman of Barclays, the chairman of Midland, the chairman of Williams and Glyn's, and the representative of the Scottish Bank. I put down this amendment before the 15 pages of Government amendments which reached Edinburgh only at midday on Monday, so it was quite impossible to do anything about them. But in any case I am quite satisfied that they do not in any way alter the need to bring some sense into Section 54. I do not trust entirely my own judgment in the matter but I have consulted others whose business it is to understand it and they are quite satisfied that the situation does not make the slightest difference. If I had any doubt about it, the noble Lord, Lord Seebohm, referred last Thursday night to Section 54. So did the noble Lord, Lord Wedderburn, who called it anomalous, which indeed it is in many ways.
What we are trying to do in this new clause is to bring some sense into Section 54 of the 1948 Act. I believe it has been called the "bankers' bogey" because they never know where they stand. May I explain what Section 54 does. First, it says that it is illegal for a company to purchase its own shares. Then it makes provision for providing shares for

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employees either as trustees or alternatively by direct advance, but it makes it quite clear that it is illegal for a bank to advance money for the purchase of a company's shares; for a company to use a loan from a bank to purchase own shares. Immediately the criminal sanction comes into operation. First, the officers of the company concerned are all fined £100. In a way that does not matter to the banks but, as an illegal act, the loan is then void. That is the problem which the banks have to face. When a loan takes place, supposing the borrower told a lie it would not make any difference. The loan would be void.
My proposal makes it clear that if a loan is made, its purpose has to be stated and it has to be supported by a statutory declaration. That makes the position quite clear, and the bank is completely safe. What matters more than whether the bank loses some money is that it inhibits the free use of loans for perfectly legal, normal processes. It makes banks reluctant to make loans. Therefore it is in restraint of trade. The noble and learned Lord the Lord Advocate said that he was trying to remove obstacles to trade, but this is an obstacle to trade. I have no doubt that this would give a great deal of satisfaction to those who have to handle these matters. It is an improvement. It would not alter anything else. It is not covered in any way by the 15 clauses which the Government put in last Thursday. I beg to move.
Lord Lloyd of Kilgerran: It gives me pleasure to follow the noble Earl, Lord Selkirk, and to support his amendment. I have come across certain difficulties which banks have got themselves into by a misunderstanding of the word "assets". A client comes along and says that he wants to purchase certain assets, and the assets that he wants to purchase are know-how—quite clearly the know-how of other companies. In the course of the discussions the word "assets" seems to become prominent. It is thereafter found that the money was used for the purchase of the shares of a company, not for technology. It is all quite inadvertent, a complete misunderstanding. They had involved provincial lawyers who knew the law, but there was a muddle between the directors of the company and the managers of the bank. It seems to me that in a case of that kind, section 54 is far too stern a weapon to be used against a company. Therefore I support the amendment of the noble Earl, Lord Selkirk.
Lord Seebohm: I should like to support this amendment very strongly. I joined Barclays Bank in 1929, the year in which Section 84 of the Companies' Act 1928 came into force. Ever since that time, it has been a plague for those operating in the banking field. The points have been well made by the previous speakers. I hope we can get this amendment through today.
Lord Noel-Buxton: I should also like to support my noble friend Lord Selkirk. At Second Reading I described Section 54 of the Companies' Act 1948 as the "dreaded Section 54". I had hoped that the Government against the background of their proposals to give power to a company to purchase its own shares would put down their own amendment. I do not see
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it, although I may have missed it; but I am pretty sure it is not there. I understand that the purpose of Section 54 of the 1948 Act is simply to prohibit what would amount to a reduction in capital without the sanction of the court. Is this really so heinous an offence as to justify the almost infinitely wide net of Section 54 which, if breached, renders the transaction and any security entered into unenforceable? The practical difficulties caused by the section are only too well known by practitioners and their clients. They are perhaps highlighted by the recent case of Belmont Finance Corporation v. Williams Furniture (No. 2). My noble friend's amendment would, if enacted, go a long way towards alleviating the practical difficulties to which I have referred. I hope that the Government will support it or at least will undertake to table an amendment of their own to amend Section 54.
Lord Wedderburn of Charlton: I hesitate to speak in a different sense on this amendment because the noble Lord, Lord Lloyd of Kilgerran, appears to have established a norm of close agreement which is reasonable, from which one trespasses at one's peril. But I hope that your Lordships' Committee will not accept the amendment. For once I hope to hear from the Government Front Bench the sentiments which I wish to put before your Lordships. It is true that, after the two decisions of the Court of Appeal in the case of Belmont Finance Corporation v. Williams Furniture, the application of Section 54 of the 1948 Act has been strict indeed—or, on one reading of the judgments, it may be very strict indeed. It is true that after the 1980 Act the penalties have now gone way beyond the £100 fine. Nevertheless, I hope that the Government will ask the Committee to look at the purpose of Section 54 and at the possible maladministration, at least of financial affairs, which could be the result of passing an amendment of this kind.
The amendment is in two halves: first, the relaxation of the ban on providing financial assistance for the purchase of shares where that is not the purpose of the transaction and, secondly, the declaration of a solvency route to exception from the prohibition. The first point I want to put to your Lordships' Committee is that if one looks at the many inspectors' reports of the last decade and asks oneself whether either of those exceptions would have allowed the malpractices that are there apparent to have gone through the net more easily, the answer is, yes. If one looks at the Hartley Baird case of Dr. Wallersteiner's extraordinary company mismanagement, at the Ferguson and General Investments report and, indeed, at a dozen others, the relaxation of Section 54 would have made life easier.
It may be said that Section 54 as it stands is frequently evaded. That is true. That is why, over the last 15 or 20 years, committees and debates have centred around the difficult problem of not attaching liability to what one might regard as a genuine loan or other provision of finance for the purchase of shares which does not in any way reduce capital or attack the concept of the maintenance of capital and, on the other hand, maintaining what it must be said, in view of previous speeches in your Lordships' Committee, is surely the very culpable practice of using a company's own financial resources for the finance of the

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purchase of its shares. It strikes at the very heart of British company law understanding.
The Government, I think, are in a difficulty. As I suggested to your Lordships' Committee when it was dealing with the clauses on companies purchasing their own shares, the structure which the Government have put into the Bill relating to the purchase of own shares puts them in difficulty regarding Section 54. It may be that the line that they wish to draw, if they are prepared to accept any amendment to the 1948 Act—perhaps one logical for them—is to say that purchase of a company's own shares, given the conditions apparent in the clauses they put in, does not reduce capital or attack the concept of maintenance of capital, and therefore we will relax Section 54 in regard, for example, to loans but not in regard to provision otherwise of financing, which would attack the principle of the maintenance of capital. That is a possible line to explore, but it is very difficult from this amendment, and I hope that the Government will remember the conclusions of a previous Conservative Administration in 1973.
Since we are not making party points, I should like to say that I think the Companies Bill of 1973 was perhaps the best post-war Companies Bill to have been brought before Parliament, and it is a great pity that much of it has not been acted upon and a great pity that this Administration cannot be wise enough to bring many of its provisions forward again. But in the White Paper (Cmnd. 5391) which preceded that Bill, in paragraph 47 the Government regarded Section 54 as fulfilling a useful purpose in inhibiting unscrupulous transactions, regarded the declaration of solvency as not being a sufficient harrier against those unscrupulous transactions, but saw the point of an attempt to stop it hitting the innocent in the way that the Jenkins Report described in 1962.
The Jenkins Report in 1962 suggested five conditions that might be considered for the relaxation of Section 54 of the 1948 Act. It required that the transaction, to be excepted from Section 54, should be approved by special resolution; it required, secondly, declaration of solvency; it required, thirdly, a right for dissentient shareholders to complain of the transaction if they held 10 per cent. of the relevant shares; fourthly, it required 28 days between the special resolution and the transaction; and fifthly, it deemed financial assistance to arise, despite all those conditions, if within 12 months of the acquisition of control, the company purchased an asset from the controllers. Those conditions are a long way from this amendment, and I would urge your Lordships' Committee to look askance at an amendment so loosely drawn as this: loosely drawn to widen the net of the use of company resources for the purchase of shares, which is in the middle of a very great deal of corporate malpractice. I hope that the Government will very strongly resist this amendment.
The Lord Advocate (Lord Mackay of Clashfern): As my noble friend Lord Selkirk has said, this is a proposal for the alteration of Section 54 which, as he has mentioned, has been put forward by the Law Society of Scotland, and with considerable support. The Government are well aware of the concern which
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is felt among financial institutions and practitioners in company law about Section 54, and consultations are proceeding with a range of bodies, including, as well as the Law Society of Scotland, the Law Society of England and Wales, and also the Committee of London Clearing Bankers, to which my noble friend Lord Selkirk referred. There are, of course, implications for the job ownership companies which were the subject of amendments tabled by the noble Lord, Lord Seebohm, on the previous occasion. That aspect will certainly require to be considered in the talks which we are hoping to arrange on that matter.
This consultation is proceeding as rapidly as possible, given the difficult questions which are involved, to some of which the noble Lord, Lord Wedderburn, has pointed. At the moment, while we recognise the need to solve this problem, we are not satisfied that this particular clause would necessarily be a good solution to it. For example, so far as branch (a) of the clause is concerned, we would not think it sufficient merely that the purpose or principal purpose should be not to provide financial assistance. There should require to be some further provisions about the purpose, in our view. So far as (b) is concerned, if I have understood the proposed clause correctly, financial assistance of the kind to which Section 54 applies would be permitted, provided the company was solvent. We do not think that this is of itself a sufficient or appropriate test for an exception to the present Section 54. Indeed, it is hard to see that any protection at all on that line would be left if effect were given to this particular proposal.
So I hope my noble friend will feel that we recognise the importance of this problem, of the necessity to get, so far as possible, an agreed solution to it—which is extremely difficult—and, in the light of that, will feel able to withdraw his amendment, in the hope and expectation on our part that our consultation will prove fruitful and that we shall be able to bring forward a satisfactory answer to this extremely complicated problem.
The Earl of Selkirk: The noble and learned Lord is proposing a holding operation. This holding operation has been going on for 30 years. Are the Government any wiser than any other Government have been over the last 30 years? It is known by the noble and learned Lord that representations have been made by all sorts of bodies, including the clearing house. They have been made time and time again, and by the Scottish Law Society, but the noble and learned Lord continues with his great principle of hasta manana—as the Spaniards say—let the thing solve itself sometime in the future.
Can the noble Lord really not take it further? This may not be a final solution. This clause will clarify the issue, it will enforce the purpose, it will not hit at the innocent and it will avoid a great many of the faults. It may not be perfect, but from what I understand—and I am by no means an expert—it will make the position very much easier and it will certainly not prevent the Government from arriving at a better solution than this, if they can find one. This matter has been hanging on for a very long time indeed and I see no particular reason why this amendment should not be accepted, unless the noble and learned Lord can say that he will make some effort

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to bring it into this Bill. There is nothing in this subject which is not perfectly well known to the City and also to the Department of Trade. This is a measure of alleviating an urgent situation. It does not hurt anybody. With great respect to much of the learning of the noble Lord, Lord Wedderburn, it does not hurt anybody, but it safeguards the proper execution of legal business, and for that reason I should like to ask the Government to think again and to be a little more forthcoming.
Lord Mackay of Clashfern: We will certainly do our best to bring forward at the earliest possible moment a solution to the problem. It is not just a question of tomorrow, dear as that may be to the hearts of some Scotsmen. So far as we are concerned, the situation is that we are undertaking extensive and fairly precise consultations with these bodies at the moment, and the difficulties to which, for example, the noble Lord, Lord Wedderburn, drew attention, are substantial difficulties which could have an effect on the structure of our financial institutions and companies for the future. So I hope that the noble Earl, Lord Selkirk, will feel that we are not just waiting for tomorrow to solve the problem; we are in fact doing our best to achieve a solution which will be satisfactory to all parties and we hope to complete that within a reasonably short time.
The Earl of Selkirk: I have no option but to withdraw this amendment, but I will ask the noble and learned Lord, certainly at Report stage, whether he has made any progress. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lyell: It might be for the convenience of your Lordships if the House were to resume in order to take a Statement. I beg to move that the House do now resume.
Moved accordingly and, on Question, Motion agreed to.
House resumed.

Foot and Mouth Disease Outbreak
3.50 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, if it is convenient to your Lordships, I should like to repeat a Statement being made by my right honourable friend the Minister of Agriculture in another place. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement about foot and mouth disease. As honourable Members will doubtless have heard, an outbreak of the disease was confirmed by the Ministry in the early hours of yesterday morning. In the middle of Saturday afternoon a veterinary officer from my department was called to a farm near Yarmouth on the Isle of Wight. After examining the cattle, samples were rushed to the Animal
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Virus Research Institute at Pirbright, where, at I am on Sunday, they confirmed foot and mouth disease. Slaughtering of all cattle on the farm in question began at daybreak on Sunday morning. They were slaughtered humanely and buried; so too were the pigs on an adjoining farm, which were considered to be dangerous contacts, and the cattle on another farm on the island which had been visited by a relief milker who earlier had been on the infected farm. So far, 213 cattle and 337 pigs have been slaughtered. I know I reflect the view of the whole House when I express sympathy to the farmers and their families whose livestock has had to be destroyed and who have seen a life's work come to a tragic end.
"Movement restrictions were applied immediately on all farm animals in an area comprising the whole of the Isle of Wight and the southern part of Hampshire and Dorset, roughly from Christchurch to Portsmouth. As the House would expect, the most stringent precautions are being taken to prevent the spread of the disease. The veterinary service are tracing all relevant movements which took place shortly before the outbreak was confirmed, including 16 cattle which were sent to Shaftesbury market, and have placed movement restrictions on the farms of destination. Close observation will be kept on the animals concerned.
"I would repeat the advice given to farmers on the radio and television at frequent intervals yesterday to be especially vigilant and to report any suspicious symptoms in their animals. I would also ask the public in the affected area to keep off farmland where there are livestock and to collaborate with farmers in their observance of the restrictions.
"It is too early to forecast the likely pattern of developments but I shall, of course, keep the House informed".
My Lords, that concludes the Statement.
Lord Peart: My Lords, I am grateful to the noble Earl, Lord Ferrers, for repeating the Statement. It is rather sad for many of us. I feel it myself because 13 years ago I was involved in a similar situation which we thought could be disastrous if it continued, and I well understand the worries of the farming community, and indeed of all the people in the Ministry of Agriculture, including veterinary surgeons and advisory officers who are involved. I am sorry that one Member of Parliament said that precautions lacked urgency; this is in today's Times, reporting a Tory Member of Parliament. I think it would be better if colleagues in both Houses realised that this is a difficult situation and we must leave it to the experts, the specialists, to see that we overcome it. I believe we shall. I will not press too much now, because I know that the department must be very active and that the centres which are responsible for giving information to farmers and others will operate virtually all through the night.
I would like to ask this. I hope there will not be a change of policy regarding the whole issue of slaughter and compensation. I believe that slaughter is the right policy and that vaccination is not. In other words I endorse basically what the Northumberland Report recommended. At this stage I would rather leave it to the department to get on with the job.
Lord Beaumont of Whitley: My Lords, we too would like to express our sympathy to the farmers who have suffered this loss and hope that there will be no more. I agree with the noble Lord, Lord Peart; basically I feel that our policy on these matters in dealing with outbreaks of foot and mouth disease is the right one. May I ask the noble Earl whether there is any confirmation of the suggestion, as reported in today's papers, that the infection was brought in airborne from France? Is there any means of identifying the virus as one that is of continental origin? Have we any further information about the source of the infection?
Earl Ferrers: My Lords, I am grateful to both the noble Lord, Lord Peart, and the noble Lord, Lord Beaumont of Whitley, for their acceptance of this Statement and their confirmation that they agree with what is being done. The answer to the question put to me by the noble Lord, Lord Beaumont, is that the virus in France is O-type virus, and it appears to be a virus of a similar nature in the outbreak which has occurred in the Isle of Wight. Clearly tests will have to go on, but at present it looks as if—and one can say no more than that—the outbreak in the Isle of Wight is one that has come from France.
The noble Lord, Lord Peart, said that one Member of the other place had referred to a lack of urgency by the Ministry of Agriculture. I would say that totally the reverse was the case. The farmer found after lunch on Saturday that he had suspicious signs in his cattle. He rang up his local private vet, who, on being told what the symptoms were, quite correctly said, "This is something for the Ministry of Agriculture". The Ministry of Agriculture veterinary surgeon arrived on the premises at 2.40 on Saturday afternoon, inspected the cattle and thought that the symptoms were bad. He contacted Tolworth at 4.15 on Saturday afternoon. They told him to take samples from the cattle affected, which he did. The samples were put on the ferry to Southampton at 8.15; at Southampton they were collected by someone from the Ministry of Agriculture and they were taken to the Animal Virus Research Institute at Pirbright, where they arrived at 9.45 on Saturday evening.
The tests were done, and at one o'clock in the morning it was confirmed that this was foot and mouth disease. The veterinary officer concerned was so informed that night. At six o'clock in the morning, at daybreak, the veterinary surgeon went along to the farm concerned and destroyed the cattle which were showing signs of infection and came to the usual agreement over compensation. Those that were not showing signs of infection were later destroyed by the normal processes. All the animals were destroyed and buried by three o'clock on the Sunday afternoon. I think that is an astonishing success story. At a time when it has become fashionable in some circumstances to criticise the Civil Service, I would like to put on record that I think this is a quite magnificent achievement of which we should all be intensely proud.
The noble Lord, Lord Peart, said he hoped the Government would stick to the slaughter and compensation policy. This is what we intend to do. I would remind the noble Lord of this, and I know that he knows it full well: that foot and mouth is the most
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infectious disease known to animals and humans. If this disease were allowed to let rip in this country it is estimated it would go through all the animals within four months. Other countries would like our island status. Of course, once you start vaccinating animals you cannot tell which animal has been vaccinated and which animal has got the disease; nor can you tell whether a vaccinated animal is a carrier of the disease.
I would only mention this finally to your Lordships. If we were to move to a vaccination policy it would be likely to cost £45 million in the first year and £23 million thereafter, that is, every single year. Those are figures which are seven years old, so it would now cost a great deal more. In the last outbreak, in 1968, the total cost was only £26 million, and of course for the succeeding 13 years there has been no cost. Therefore, the noble Lord, Lord Peart, is quite right to draw attention to the fact that it is our intention to keep on this slaughter and destroy policy, which in the interests of animal health is entirely right.
The Lord Bishop of London: My Lords, from these Benches I would like to associate myself both with the words of sympathy that have been so eloquently expressed by speakers and also with the congratulations to those who have acted with such speed and with such efficiency. I was Bishop of Chester throughout the last terrible outbreak. I know what an appalling experience this can be for the communities who are involved. There are stock-breeders who wake up in the morning with their stock intact—stock upon which they may have expended a lifetime of care and expertise—but by midday they are all dead.
Moreover, the more terrible aspect is the effect that this disease has upon the community because obviously everybody suspects that everybody else is a carrier and infected, and therefore for a period of time there is a complete breakdown of any kind of social intercourse and friendship between various families and different people. It is a terrible and traumatic experience for those who have to undergo it. I only ask that the Government will see to it that those who suffer receive the very fullest compensation, not only for the loss of their herds, but also to meet as well as possible the dreadful suffering and sorrow that this disease causes to those who are involved.
Viscount Massereene and Ferrard: My Lords, I should like to congratulate the Government very much on the extreme urgency which they have deployed in this matter. I should like to ask my noble friend a question and I quite understand if he cannot answer it—I cannot answer it, but there is no reason why he should not be able to do so. I understand that the restricted area takes in the New Forest. In the New Forest there are a lot of wild deer, and of course deer are cloven-hoofed. Wild deer do not appear to catch foot and mouth, but they do carry it. Has the Ministry of Agriculture any policy regarding wild deer? Of course we could not slaughter them all—that would be impossible. However, has my noble friend any information on the position regarding wild deer and this horrible virus?
Lord Davies of Leek: My Lords, before the noble

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Earl answers that fascinating question, I should like to say that as one who, for about a quarter of a century, had the privilege of representing a large agricultural seat with thousands of farms in it, I know the tragic effect that even the threat of this disease can have. In the Pennine area in Leek we were near to the outbreak. It has a shattering effect on the farms of small acreage. I should like, contrary to some criticism, to pay a tribute also to the effect of television—both the independent networks and the BBC—in bringing home to the public the terrible problem that confronts us as regards the ease of spreading this disease. Finally, will the Government say what the chances are, since we are in the Common Market, of our now having a uniform policy throughout Europe for attacking the problem of foot and mouth disease?
Earl Ferrers: My Lords, I should like to reply to the three questions which have been put to me so far, otherwise I might become a little forgetful of exactly what has been asked. As regards the matter raised by the right reverend Prelate the Bishop of London, I remember well his contribution when we debated this matter on another occasion. Indeed, I recalled only this morning what he had said way back in 1968 as regards the devastating effect that this disease has on the human community. Indeed, so well did I remember the right reverend Prelate making that remark that when he got up to speak I put down on my notes "Bishop of Chester" instead, of course, of "Bishop of London", because I remember him making that remark when he was the Bishop of Chester. I can tell the right reverend Prelate that the compensation which the Government offer is for the commercial value of the animals. It is for all expenses dealing with disinfection of the premises. However, of course, it does not cover loss of profit for which people have to take out their own insurances, and nor in any way can it begin to cover the desperate personal tragedy, inconvenience and sorrow which losing a lifetime's work—and many of the animals are one's personal friends—can have on a farmer. One recognises that only too well.
My noble friend Lord Massereene and Ferrard quite rightly pointed to the problem of wild deer. The Ministry of Agriculture has the powers to round up and to slaughter wild deer if necessary. My noble friend has said that it would be an impossible task. I agree that it would not be an easy task, but I do not think that it would be impossible, in the same way as my noble friend said that it would be impossible for me to answer his question because he did not know the answer to it. I can only tell him that even miracles can happen and I hope that he will be satisfied with that answer.
As regards the point raised by the noble Lord, Lord Davies of Leek, I point out that the problem of the European Community is that in many countries—for instance, France—there is a vaccination policy. Many countries wish that they could have the status which we have here, which is a disease-free status. We have the advantage of being an island and that is how we can keep that status. I would remind him of the fact that a Ministry of Agriculture veterinary surgeon has been to see what is being done in France. He was
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most impressed by the way in which they were carrying out their precautions. Let me tell the noble Lord, because he may not be aware of it, that in France when they have an outbreak of foot and mouth disease even though they have vaccinated, those animals also are slaughtered.
Lord Collison: My Lords, it is rather difficult to put what I wish to say in the form of a question to the Minister. However he will, I am quite sure, be aware that while we all thank him for his Statement, we all regret that it had to be made. We all agree with every word that has been said about the damage that it will cause to the industry, the distress that it will bring and the cost that will be incurred by the farmers involved.
I wish to rise to my feet for just a few moments to call the attention of the House to the fact that farm workers and their wives are also involved, as indeed are farmers' wives. So far as the farm workers are concerned, they have to be extremely careful about their movements, about disinfecting their boots and anything else that is involved with an epidemic of this kind. So far as farm workers' wives and farmers' wives are concerned, they also have to be extremely careful and restricted in their movements both socially and in doing the household shopping. Although it is a long time since I was officially associated with the National Union of Agricultural and Allied Workers, I am quite sure that I can, on behalf of the agricultural workers, give the House the assurance that they will do everything in their power to limit the spread of this most dreadful virus.
Lord Feversham: My Lords, perhaps I might just link a question in with those last remarks. I wonder whether the Minister can give us some idea of his thinking with regard to how the general public is to be warned about the seriousness of this matter. We have heard from a number of people about the strictures which will be placed upon farmers, farm workers and farmers' wives in the communities in which an outbreak of foot and mouth takes place. While agreeing with all the points which have been made, and the congratulations that have been expressed to the Ministry of Agriculture on the speed with which it has tackled this new outbreak—and I hope very much that its efforts will contain the outbreak—I would say this. If the outbreak is not to spread, then I think that it is absolutely essential that the general public, who now have greater access to the countryside than perhaps ever before and who use that access to a greater extent (and I am thinking of the Easter holiday and the Spring Bank Holiday which are coming up, when a lot of people from the cities will go to the countryside), should know how serious the situation is.
Earl Ferrers: My Lords, first as regards the remarks made by the noble Lord, Lord Collison, I should like to say that he is absolutely right to refer to farm workers. When I used the expression "farmers" it was supposed to be an all-embracing term covering farmers and farm workers as opposed to specific employers and employees. Very often it is the farm workers themselves who are the stockmen and the ones who have lived with these animals, and who feel

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the blow to almost a greater extent in some cases than possibly the farmer himself. It is something which everyone gets involved with, and the noble Lord is absolutely right to refer to the fact that farm workers will be suffering just as much as others. He is totally right to refer to the fact that there are human constrictions and when a farm is an infected premises the farmers themselves are contained within the farm until that farm is released from infection.
As regards the noble Lord, Lord Feversham, he will know, of course, that when an outbreak occurs on a farm there is all the paraphernalia of the police and notices saying "This is an infected farm". Also a ring is drawn around the infected area concerned, about which I have explained, and tomorrow each farmer in that area will receive a booklet explaining the disease and exactly what he should and should not do in order to try to prevent the disease occurring and spreading.
With regard to the general public, the best thing that they can do is to watch very carefully the television and the press and to listen to the radio, and to take reasonable precautions, particularly if they are in an infected area; they should not just walk over people's farms when they can see disinfectant lying around, because, although this disease can be airborne, it can also be carried on vehicles and on people's shoes. It is essential that the public take all reasonable precautions.
I would only reiterate that part of the danger lies in the fact that this can be a wind-borne infection and, therefore, whatever physical precautions may be taken still may not prevent the damage occurring. However, that does not mean to say that each person should not conduct himself with an air of considerable responsibility.

Companies (No. 2) Bill [H.L.]
4.11 p.m.
House again in Committee.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 125:
After Clause 41, insert the following new clause:
("Obligations of persons abroad to notify company of interests in shares carrying unrestricted voting rights
.—(1) The Secretary of State may by regulations made by statutory instrument make such provisions as appear to him necessary for the purpose of ensuring that the obligation of a person under section 33 of the 1967 Act (obligation of persons to notify a company of acquisition, changes in amounts of and disposal of shares in the company carrying unrestricted voting rights) shall apply to a person who is not resident in the United Kingdom and to any other person or persons acting or deemed under such regulations to be acting with that person in pursuance of a common purpose, whether that purpose be their predominant purpose or not, as if that person and each of such other persons is interested in such shares to the extent of the aggregate interest of all of them.
(2) For the purposes of this section the Secretary of State may make regulations under section 26 of the 1976 Act (Duty to notify company of acquisition etc. of voting shares) prescribing a lower percentage for persons falling within subsection (1) above than that at any time prescribed under subsection (2) of that section for the purposes of section 33 of the 1967 Act.
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(3) Regulations under subsection (1) above may make different provisions for different classes of case and may contain such incidental and supplementary provisions as the Secretary of State thinks fit, and the Secretary of State may by regulation under this section vary or revoke such regulations.
(4) No regulations shall be made under this section unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament.
(5) For the purposes of this section a person (including a body corporate) is not resident in the United Kingdom if he is not so resident for the purposes of the Income and Corporation Taxes Act 1970 subject to such further provision in this regard as the Secretary of State may make by order under this section.").
The noble Lord said: This amendment to the Companies (No. 2) Bill was, in a sense, an addition to the amendment tabled by the noble Lord, Lord Lloyd of Kilgerran. In view of the Government's statement on the matter of concert parties, with which of course it deals, it is a little difficult to know how to make the proper and profitable use of the time of your Lordship's Committee. But it seemed to me and my noble friends that in view of the statement of the noble Lord the Minister, Lord Trefgarne, that the Government intend at some stage or other to bring forward proposals on the issue of the disclosure of interests by those acting in concert or in agreement, it was worth probing whether they can tell us anything about the aspect of the matter to which this amendment relates.
Perhaps I could preface a few short remarks upon that aspect by saying that in our view the disclosure philosophy, which is fundamental to company law, has never been as important as it is today. In 1962 in its report, Cmnd. 1749, the Jenkins Committee stated the principles simply and boldly in paragraph 142:
"The directors and other shareholders, and indeed the employees, of a company ought to be able to ascertain the identity of any substantial shareholder".
That seems to us to be right, and it seems to us to be right not only in regard to persons acting in concert generally—in respect of which we strongly supported the amendment of the noble Lord, Lord Lloyd of Kilgerran—but also in regard to the aspect of interests in shares, which is of particular concern to those who have recently looked at some of the less acceptable practices in company affairs.
It is, of course, true that the Consolidated Gold Fields affair, and the report of the inspectors upon it, have brought into new prominence the problem of the foreign holder or foreign beneficiary of shares. It is frequently a problem because it is a foreign nominee; otherwise it is sometimes a problem because it is a foreign beneficiary; and sometimes, of course, because it is such a long string of transactions in interests in securities outside the jurisdiction, it is a problem because the trail is lost even by the best of inspectors appointed by the Department of Trade. The Department of Trade consultative document—which, as I am about to criticise it, I wish to say in my opinion was a most helpful and useful document—issued in 1980 on disclosure of interests in shares in my view did less than justice to the problem when it cast aside the problem of foreign interests in shares by simply stating that:
"British company law can properly be applied to all parties interested in a Stock Exchange transaction involving securities in a British company, although in some cases involving foreign interests creates difficulty in enforcement".
The problem of foreign interests is more important than that, and it is not a question of any exercise in xenophobia that made us put amendments concerning this problem down on the Marshalled List. The problem is that it is twice as difficult to fulfil the fundamental principle of disclosure where the interests become scattered abroad. As was said in the inspector's report on Ashbourne Investments Limited in 1979 at paragraph 1257:
"The present legal machinery to enable the identification of the true owner of a British registered company where those shares are held by a nominee resident abroad"—
is inadequate. Those last two words summarise the rest of the statement. That was the nub of the matter. in other words, if concert parties are in general a problem—and the Government now accept that they are a problem, and it seems that they are a problem which should be met by legislation—then we would hope that the Government would give particular attention to the problem within that problem of foreign interests in shares.
The amendment which we have put on the Marshalled List for your Lordships' consideration follows, in the first part, the structure of the drafting of the noble Lord, Lord Lloyd, where we, too, were of the opinion, in slightly different words, that the problem of common purpose—which seems to us to be the right test—should be one that should be enacted in general terms, to which exceptions could then be made by regulation.
Although understanding the general sentiment of his remarks, I should like to interpose that I am a little surprised that the noble Lord, Lord Trefgarne, dealt with the question of legislation by secondary or delegated legislation in this area in the way he did; because, although accepting that the fundamental liabilities—and, in particular, where they are penal and criminal liabilities—must be spelt out in the primary statute and that perhaps these clauses that we have put forward are inadequate in that respect, I should have thought that in regard to company administration the principle that derogations or exceptions can be made by way of statutory instrument is sufficiently established for it to be worthy of consideration here. That is how we think the matter should ultimately be dealt with.
However, there is a second point in our Amendment No. 125 in subsection (2). That relates to the trigger for disclosure in listed shares. Section 33 of the 1967 Act began with the trigger at 10 per cent. The 1976 Act reduces that to 5 per cent. and makes it clear that it applies to any class. But it is worth remembering that the Cohen Committee as far back as 1943 was asking for a I per cent. disclosure. It is not obvious or written on tablets of stone that the level of disclosure should necessarily be the same in respect of all classes of interests and holders. Subsection 2 would give the Secretary of State power to adjust the level of interest in regard to foreign holdings so that the trigger is different in number from the figure which applies to holdings in general, where that is thought to be necessary.
It may be said that the power can be used in a flexible way at the moment, but in our view that is not clear and it is worth having legislation of this sort upon it. In other words, because there is a special difficulty in operating the disclosure principle in respect of foreign
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holdings—as the inspectors' reports have discovered not merely in Consolidated Gold Fields but also in the Dunlop Holdings interim report, which has been mentioned this afternoon, where it has become quite impossible to trace the reality of control—in this area it is necessary for the new structure of the law, whatever it is to be in Government thinking, to pay particular attention to holdings outside the jurisdiction, and to include a sufficient power for the Secretary of State, where it is necessary, to make special provision in regard to those holdings if there is in effect a refusal or unwillingness to operate and satisfy the disclosure principle.
While I am commending this amendment to the Committee, perhaps I may mention one other matter which derives from the same Department of Trade document. It is said there that the legislation ought not to take the form of a statute and the use of the voluntary codes—that is to say, the Takeover Panel, the Council for the Securities Industries—by way of a highway code. There is the suggestion—I hope I am not summarising unfairly—that this would risk confusion between what is law and what is the self-regulation area.
I would hope that the Government would not take that approach either. Indeed, the whole point of having a wide power to take necessary action by regulation of statutory instrument would go in the opposite direction. I say this to the Government for this reason, and it is particularly relevant to foreign holdings; the line between self-regulation and legislation has already been blurred. The Stock Exchange appears in many places in the legislation, and not least in the 1976 Act, where of course it has the power to obtain and to purvey information about directors' holdings and interests in a company's shares. Of course the Stock Exchange is now the competent authority by law under, I believe, two—about to be three—of the European Economic Community regulations in respect of the listed securities and the informal ion to be given in that respect.
Therefore, the line between the code of self-regulation and statute and its regulations is already blurred. It would seem to us that this area of foreign holdings would be an area for profitable co-operation between the two without bothering about the risk of blurring the borderline, because the borderline between self-regulation and statutory order does not really matter. What matters is to have a system which operates correctly, well and efficiently, and satisfies fundamental criteria, especially the disclosure principle. It is with those thoughts in mind that I commend this amendment to your Lordships' Committee. I beg to move.
4.24 p.m.
Lord Trefgarne: I must say that I had hoped that, in the light of what I had to say on a previous amendment moved by the noble Lord, Lord Lloyd of Kilgerran, the noble Lords in whose names this amendment stands might have felt able not to move it. Be that as it may, they are quite entitled to do so.
I have already explained that the Government do not consider that this is an appropriate matter to deal with by regulations. But I have announced that the

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Government propose to bring forward their own provisions. I am not in a position at this stage to be specific about the character of our provisions. I can say, however, that this amendment contains a number of unacceptable features. For example, we find it surprising that the noble Lords should seek to confine regulations, as I understand the amendment, to persons resident outside the United Kingdom. In a purely formal sense, of course, such a discriminatory provision would appear to be contrary to the Treaty of Rome. But, leaving that aside, do noble Lords believe that concert parties comprising United Kingdom residents are in order, but concert parties comprising non-residents are not? Surely if the law is to make provision for the disclosure of concert parties, a concert party is a concert party wherever it may be. Why differentiate between them on the basis of the residence of participants? Of course, concert parties involving overseas residents pose particular problems of enforcement. But the same might be said of the existing disclosure requirements. And the question of enforcement is quite separate from that of the nature of the requirement.
There are other aspects of this amendment that indicate to me that noble Lords have not begun to get to the roots of the problems of defining a concert party disclosure requirement. Take the question o common purpose. "Common purpose" is itself a remarkably vague phrase for defining a statutory requirement. What purpose? In respect of whom? In accordance with what criteria would the regulations "deem" a person to be acting in pursuance of a common purpose?
I do not want to take too much of your Lordships' time on this amendment, but I should just like to make one final point before asking the noble Lord to withdraw it. The regulations are to require disclosure by persons interested in shares of a particular kind. The present disclosure requirements, in Section 37 of the 1967 Act, which this amendment purports to apply, impose an obligation on those who know that they are interested in shares of the relevant amount. I wonder how the noble Lord who has moved this amendment would propose to deal with the problem of knowledge. Is ignorance to be a defence? If not, are persons covered by the amendment to be required to take steps to ensure that they know every interest of other members of the concert party? What if they do not know of an interest of another member of the party? These are important matters which any proposals for legislation must address.
I hope I have given some indication, in explaining why this amendment is not acceptable, of the importance and complexity of the issues that must be grappled with in dealing with this subject. I hope that your Lordships will be content to wait for the Government amendments on this topic.
Lord Wedderburn of Charlton: The Minister has dealt with so many interesting points that I am tempted to follow them, but I suspect in view of his tone that he would not wish me to do so, and I shall limit myself to this: it is not my understanding that this amendment is contrary to any treaty to which the United Kingdom is party. Nor do I believe that there is great
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difficulty in matching its words to Section 37, although I appreciate that the problem of interest needs further definition.
I merely conclude with this: if, whatever his criticisms of the amendment—and they may be justified, the tone of the noble Lord's reply is the tone that we are going to get in the Government's prososals on concert parties, then indeed we are not likely to get them for quite a time. Of course it is a difficult area to define common purpose. But if the Government are suggesting, just to take his one point, that the definition of common purpose that is necessary, which would be done here partly by regulation, is so difficult that it cannot possibly be addressed, then their proposals are going to be a long time in coming.
Having discussed the matter with the noble Lord, Lord Lloyd of Kilgerran, to whose amendment this is a supplementary amendment because it follows the same lines, we thought it worth seeing if the Government had anything to offer about their own thinking. I take all the negative points that the Minister has made as criticsm of this amendment. We shall see what criticisms we have to make of their amendments with no further knowledge this afternoon about what they are likely to be. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 42 to 46 agreed to.
4.30 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 126:
After Clause 46, insert the following new clause:
("Extension of power to impose restrictions on securities and on companies

.—(1) In subsection (1) of section 174 of the 1948 Act (Power to impose restrictions on shares or debentures) for the words "wholly or mainly to the unwillingness" there shall be substituted the words "to a substantial degree to the inability or the unwillingness".

(2) In any case where an inspector has been appointed under section 164, 165 or 172 of the 1948 Act or section 32 of the 1967 Act or when a notice has been served by a company pursuant to section 27 of the 1976 Act, the Secretary of State may without prejudice to the exercise of any powers under section 174 of the 1948 Act, direct or permit the company to cancel on a date specified, being not less than seven days from the date of the direction or permission any shares or debentures in which a person has an interest where it appears to him that that person has shown substantial unwillingness to assist the investigation or to comply with the notice in that he has failed to reveal or to take reasonable steps to acquire any information relevant to the investigation or notice.

(3) A person whose shares have been cancelled under this section shall cease to be a member in respect of the cancelled shares, but shall, notwithstanding, remain liable to pay the company all monies which, at the date of cancellation, were payable by him to the company in respect of the shares, but his liability shall cease if and when the company shall have received payment in full of all such monies in respect of the shares.

(4) A person having an interest in shares or debentures in respect of which a direction or permission has been made or given as the case may be under subsection (2) of this section may apply to the Court for the direction or permission to be quashed on the ground that he has taken all reasonable steps to reveal or acquire such relevant information.

(5) The Secretary of State may by regulations made by statutory instrument under this section provide for the disposition of that part of a company's capital relating to any shares cancelled by a direction or under permission arising under

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subsection (2) above, whether by way of credit to an undistributable reserve fund or otherwise, and may provide for such other incidental and supplementary matters as he sees fit.

(6) Where any provision in a company's memorandum or articles conflicts with or is inconsistent with a provision in a direction or permission made under this section, the latter provision shall prevail to the extent of such conflict or inconsistency.

(7) A person is interested in shares or debentures under this section where he has an interest within the meaning of section 28 of the 1967 Act, subject to such modifications made by regulation by the Secretary of State for the purpose of applying the provisions of that section to this section.

(8) No regulations shall be made under this section unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament.

(9) Where the Secretary of State makes a direction or gives a permission under subsection (2) above or places any other restriction on shares or debentures pursuant to the powers in section 174 of the 1948 Act, he shall cause a notice to be published in the Gazette of such directions or permission.

(10) Any person who fails to give effect to a direction made by the Secretary of State under this section shall be liable to imprisonment to a term not exceeding two years or a fine or both; and in the case of default by a company every officer of the company who is in default shall be liable to a default fine.").

The noble Lord said: This involves a separate but similar matter. The amendment falls into two parts, both relating to the powers of the Secretary of State under Section 174 of the 1978 Act whereby he can place restrictions of varying kinds on shares and the use of people's interests in shares in respect of voting, transfer and the like. The first part of the amendment deals with a technical and small point but one which we believe to be of importance. At present, restrictions may be placed only where there is an unwillingness on the part of a person to provide information. Briefly, the problem arose in a number of recent investigations, especially in the Dunlop Holdings investigations, where it was discovered that there might be some unwillingness but also that other people might be unable to provide the information. We would add to Section 174 "inability" as an alternative to the requirement of "unwillingness" to allow the Secretaty of State to exercise his power of restriction.
It is said that sometimes the inability to provide information derives from the local law beyond our jurisdiction preventing a person from disclosing what we here would seek to know. But it is our contention that that response cannot be allowed to determine the contours of British company law because it means that simply by moving out of the jurisdiction, the person who is the holder or beneficiary of the shares in question can evade the requirements which we would otherwise place on him. In the Consolidated Gold Fields report, the inspectors make it clear in paragraph 144 that it is a requirement which cannot be allowed to dominate the operation of our system. Thus, our first proposal is that the Government should accept the increased power of the Secretary of State to deal with cases where there is inability as well as unwillingness to provide information. That does not mean that in every such case the Secretary of State would exercise his powers to place restrictions on the voting on or the transfer of shares or the like.
The second part of the amendment also aims at the strengthening of the hand of the Secretary of State under Section 174. Power would be given to the
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Secretary of State to cancel shares as an act, as it were, of final resort, subject to the availability of an appeal to the courts by the person concerned for the quashing of such a direction of cancellation because he had taken all reasonable steps to acquire or reveal the information required.
Suggestions have long been made for the Section 174 powers to have the remedy of cancellation of the shares available to the parties investigating or controlling the matter, but they have usually required an application to the courts for an order for cancellation. In the view of this amendment, the burden should be the other way round. Where there is a case where the Secretary of State could have exercised his powers under Section 174, he should also have the right, if the need arises, to cancel shares, and the necessary provisions relating to that cancellation are in some of the subsections of the amendment; if the Government suggest there should be more, they could easily be added in that they are a matter of machinery.
The essential principle is that at present the difficulty of obtaining a proper degree of disclosure is so great that there is a need for strengthening Section 174 and the powers of the Secretary of State. Those powers should not only be exercisable where the information that is required is not given, but there should also be a right to cancel shares. The reason why that ultimate deterrent is required is that in the very worst cases the holder of beneficiary of the shares can sit tight, sit out a restriction on dividends, on transfers or on voting rights, and the only thing he cannot sit out is cancellation of his shares. I therefore hope the Government will consider with some sympathy the concept that an additional power is needed under Section 174 and that what is here proposed may be worthy of consideration. I beg to move.
Lord Trefgarne: As was evident from the speech of the noble Lord, Lord Wedderburn, when moving the new clause, the amendment contains so many significant features that it is difficult to know where to begin, and I hope the Committee will forgive me, therefore, if I deal with the points he raised at some length. Our starting point must however be the announcement, which I made earlier this afternoon, that the Government intend to bring forward their own proposals for amendments to the law relating to the disclosure of interests. As I have said on an earlier amendment, I am not in a position to foreshadow the Government's proposals in any detail. I would however expect them to cover some, but not all, of the matters covered by this new clause.
Subsection (1) of the new clause seeks to amend Section 174 of the 1948 Act in order to broaden the circumstances in which restrictions may be imposed by the Secretary of State on shares or debentures in connection with an investigation under Sections 172 or 173. The Government accept that the wording of the existing Section 174(1) can be unduly restrictive. At present, for example, where shares are held overseas and the member can refer to local laws as a restriction on the information he can provide, the imposition of restrictions cannot be considered; similarly where a person can assert that he has sold on shares that are still registered in his name and does not know what has happened to them. There may, therefore, in the Government's view, be circumstances where it is

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appropriate for the Secretary of State to consider imposing restrictions where the failure to disclose is due to other reasons than unwillingness.
The noble Lord seeks to replace the existing criterion by a new formula which introduces the criterion of inability but is qualified by the very subjective test "to a substantial degree". Such a test could cause considerable difficulties in practice, not just for the Secretary of State but for holders of shares; how is "substantial" to be interpreted or applied? The Government will be bringing forward their own amendment to deal with this problem. In order to avoid the kind of difficulties which this subsection raises, we have in mind a more extensive amendment corresponding to the existing capacity of companies themselves, if authorised by their articles, to impose restrictions in all cases of failure to discover the information required.
Subsection (2) would enable the Secretary of State to cancel shares where a person interested in them has in the view of the Secretary of State shown substantial unwillingness to assist Department of Trade investigations under Sections 164, 165 or 172 of the 1948 Act or Section 32 of the 1967 Act or a company's own inquiries under Section 27 of the 1976 Act. Subsection (4) provides for an appeal to the court and subsection (5) provides for the Secretary of State to deal with the accounting problems.
The first point to note is that subsection (2) goes well beyond the sphere of disclosure of interests. It would enable shares to be cancelled in respect of investigations into matters other than the membership of a company. Indeed, for some reason it would not apply to one of the sections under which inquiries as to who is interested in shares take place, namely Section 173. Nor is cancellation confied to questions concerning the ownership of shares. It would apparently be available in respect of any apparent substantial unwillingness to co-operate with investigations under, for example, Sections 164 or 165.
Yet there are already provisions in Section 167 of the 1948 Act to ensure that inspectors appointed under Sections 164 or 165 can obtain all the information and assistance that they require in the course of their investigation. We are strengthening those provisions in this Bill, but we do not believe that it is appropriate to contemplate a power to cancel shares in order to facilitate investigators in their inquiries into matters which may well not at all be connected with share ownership.
In any event, even were the power confined to the field of the disclosure of interests in shares, the Government do not consider that a power to cancel shares is appropriate, and they certainly do not think appropriate a power for the Secretrary of State to cancel shares. Such a power would involve expropriation of the property of the shareholder, who could avoid such expropriation only if he could prove to the court that he had taken all reasonable steps to co-operate with the investigation or inquiry. There is a range of sanctions already available to the Secretary of State, and they will be effective in most situations.
However, in the context of their decision to bring forward measures to strengthen the law on disclosure, the Government are reviewing the strength of these
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sanctions and, for example, the question of whether they provide an effective deterrent to concealment of interests, in particular perhaps in the case of an overseas holder. But we do not believe that in this, or indeed in any other area, expropriation can be right in principle; nor do we consider that cancellation is necessary in order to provide an effective deterrent. An alternative, for example, would be for the courts to have the power to require a sale of the shares and to hold the proceeds for the original owner. As I say, the Government are considering this area carefully, and will be making their own proposals.
Before inviting the Committee to reject the new clause, I should like briefly to refer to subsection (9). It would require the Secretary of State to publish in the Gazette a notice of any restrictions imposed under Section 174, or by virtue of the new clause. However, if I may end on a constructive note, I would say that the Government agree that restrictions on shares should be publicised. We shall bring forward appropriate amendments to that end.
In view of what I have said, and in particular in view of the Government's decision to bring forward their own proposals, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Wedderburn of Charlton: I am sure that your Lordships' Committee will have been very interested in the reply of the noble Lord the Minister in one particular; namely, that the Government accept that Section 174 may well be too restrictive and that they are to bring forward proposals which relate more to companies' powers to effect the necessary remedies via their own articles rather than via other action. I can say only that that seems to me not to be the most fruitful road down which the Government should go. I suspect that many of my noble friends will feel the same and will consider that in a sense it is a rather dogmatic assertion that one should stick to the area of traditional company practice, to boost company articles by the force of law, but not to use the force of law behind investigations and inspections.
In passing I say to the Minister that Section 173 plainly was not included in the amendment because the situations in which the Secretary of State can act are described as situations involving reference to persons other than himself, whereas under Section 173 he is, of course, his own trigger. I did not include that provision because I knew that the noble Lord the Minister would castigate me if he saw a provision whereby the Secretary of State was able to trigger himself, rather than be triggered by some extraneous circumstances.
My last point relates to the Minister's terminology. There have been many debates, involving many professional bodies and many persons (many of whom have rejected the idea) about the possibility of a power—usually a power in the court, I accept; which is not true in this amendment—to cancel shares. That debate has been carried on, in regard to reform of company law, without expressions such as "expropriation" and the Government really must get their terminology up-to-date. It is not expropriation; it is seizure of property without proper compensation; and if that were to be found, of course one would reject it.
With regard to the possibility of cancelling shares in

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very carefully defined areas of the law the Minister and ourselves are agreed in one respect. He said that in the vast majority of cases Section 174 powers are quite sufficient. I accept that. But we should have thought that an ultimate possibility of shares being cancelled would have been desirable. In the light of the Government's response, we look forward to their proposals, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 47 [Powers of Secretary of State under Section 334 of the 1948 Act]:
4.44 p.m.
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede moved Amendment No. 127:
Page 49, line 45, at end insert—
("(3) In subsection 6 of that section for the words "or Lord Advocate" there shall be substituted the words ", Lord Advocate or the Secretary of State"").
The noble Lord said: Clause 47(2) amends Section 334(5) of the 1948 Companies Act inter alia to include the possibility of criminal proceedings being instituted by the Secretary of State. Arising from that, a consequential amendment should be made to Section 334(6) to include the Secretary of State among those on whose application the court may make the directions permitted by that subsection. I beg to move.
Lord Trefgarne: We accept the amendment.
On Question, amendment agreed to.
Clause 47, as amended, agreed to.
[Amendment No. 128 not moved.]
Clause 48 [Disqualification of directors and others from managing companies, etc.]:
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 129:
Page 50, line 21, at end insert ("; or
(d) in the report of an inspector appointed under section 164, 165 or 172 of the 1948 Act or section 32 of the 1967 Act, the inspector states that for the purposes of this section a person has been guilty of culpable malpractice in relation to the promotion, formation, management or liquidation of a company;").
The noble Lord said: I hope that this is a less contentious area of the Bill. The clause to which the amendment relates is that which revises the situations in which a court can make an order for disqualification of a person, barring him from the management of a company for a relevant period. It is to some extent a measure of consolidation and reform, with most of which we have no quarrel. However, as long ago as 1962, the Jenkins Committee made various recommendations for the revision and reform of the powers of various courts to disqualify persons from the management of companies. If the clause went through as the Government have it, we should be left with a situation involving various types of conviction, or default in satisfying statutory requirements. The default would have to amount to a person having had three or more convictions in five years, which seems to us perhaps
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too high a hurdle for the law to have to jump. Nevertheless, they are requirements that are broadly along the same lines as they have been in the past.
In 1962 the Jenkins Committee also proposed, in paragraph 85 of Command 1749, that persons who had shown themselves
"to have acted in an improper, reckless or incompetent manner in relation to the companies' affairs"
should be added to the list where a court might—of course this is a discretionary matter—make an order of disqualification. After the report in 1962, it was argued on many sides that that list of epithets—reckless, incompetent or improper activity—was too wide. It was said not to be one which a court should have as the basis of such discretionary jurisdiction to disqualify a person from the board, or indeed from management. Personally, I always found that an odd argument, since Lord Justice Jenkins was no mean authority in company law matters, as I am sure the noble and learned Lord would agree. That he felt fit to put his name to a proposal of that kind struck me as being an encouragement to regard the formula as one which might be followed.
This being one of the few occasions on which since 1962 the list of conditions under which the director may be barred from management has been put under legislative review, it seemed to myself and my noble friends a suitable time to press the Government a little to add to their list. Indeed, we felt that we should press them again on the footing of their forebears in 1973. In the progressive Companies Bill of 1973 the Conservative Government of the day would have enacted a provision, in Clause 38, which would have given the court power to make a disqualification order where a person was convicted on indictment of an offence, whether or not in connection with the promotion, formation or management of a company—and that, of course, is an extension compared with the present Bill, being convicted on indictment of an offence—which necessarily involved a finding that he acted fraudulently or dishonestly. Compared with the palsied prose of the present Bill, that was a strong move indeed.
In the Notes on Clauses kindly provided by the present Administration in relation to this Bill it is suggested that the provisions in the Bill as they stand cover as much of the Jenkins recommendations as are clearly justified. We do not see that it is that clear. We might have proposed that the wider area of criminal liability—that is, offences which are fraudulent or dishonest, whether or not they have to do with the company—should be considered as a disqualifying event; we might have proposed the Jenkins formula of recklessness or incompetence. But, again, these might have been thought by the noble Lord, who seems to find our amendments rather extreme, to be extreme measures; but, of course, we on these Benches are extreme only in our moderation, and we therefore put forward our usual moderate amendment.
What we have done is to propose to the Government that a very clear point of reference should be taken; namely, the point of reference of one of those who is set up by the Department of Trade to inspect the affairs of companies. I am one of those who believe it is time for a full-time inspectorate, but the Department of Trade clearly does not, or at least the Administration

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clearly do not, and they go on appointing people who are highly qualified and respected in their fields of accountancy and the legal profession. These are people who will not make a judgment without good grounds, but these are people who frequently face a situation where there is not a clear criminal offence, may be or may be not some civil liability, but certainly a company malpractice; certainly one known in the City or in reputable circles and in commercial circles generally.
It is therefore our submission that the Jenkins proposal can be put into effect at any rate partially, and along the lines of the 1973 Bill, looking to the same object at which that was obviously targeted, by saying that today we have inspectors appointed to investigate company affairs who are sufficiently respected and who are sufficiently good at their jobs that, if they are given a clear phrase which is on their part a request to the courts to consider disqualification, they will know when to use it and when not to use it. This is a flexible guideline. We have chosen the phrase, "culpable malpractice". From his previous replies to my amendments I have the feeling that if the noble Lord, Lord Trefgarne, replies to this one he will find something wrong with that. I am sure there is something wrong with it, but if he likes to call it XYZ then we will put in XYZ. The point is to have a phrase in a statute which an inspector knows is the phrase that he uses when he is in effect asking any court before which the matter conies to consider disqualification irrespective of actual prosecution for a criminal offence.
It would not seem very extreme in 1981 to go that little teetering step down the path along which the Jenkins Committee bounded just a decade ago. I hope that on this matter the Government will meet our reasonable pleas by at any rate considering the matter, to take this clause a little further, especially in light of the fact that it is rare for such a matter to get parliamentary time. Meeting the noble Minister's point about parliamentary time, when we have Companies Bills we do not often have a debate on disqualification orders. Here it is, at the Government's suggestion. On that suggestion I move this amendment in the hope that they will feel able to consider it before Report stage. I beg to move.
Lord Lyell: The noble Lord, Lord Wedderburn, has moved his amendment in. I think, considerable hope, at length and in considerable detail, as we have come to expect from the noble Lord; but I wonder whether I could put to the Committee one or two parallel thoughts that were not mentioned by the noble Lord, Lord Wedderburn. First of all, the purpose of Clause 48, which we are considering, is not necessarily to introduce new grounds for disqualification. I am sure that if the noble Lord will consider Clause 48 he will see that it covers much of the ground that is already stated in Section 188 of the 1948 Act. Also, we hope that Clause 48 will streamline the existing procedures for disqualifying those persons who are already liable under Section 188 of the 1948 Act and under Section 28 of the 1976 Companies Act.
The grounds covered by these sections are restated in Clause 48 in the form of the new subsections (1)
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and (1A) to Section 188 of the original 1948 Act; but the amendment which has been moved by the noble Lord, Lord Wedderburn, would, we believe, introduce a wholly new ground for disqualification if an inspector were to state in his report that a person had been guilty of "culpable malpractice"—this marvellous phrase that the noble Lord, Lord Wedderburn, has thought up, and which seems to me to be something akin to "My Fair Lady", saying a hundred times daily, "culpable malpractice". It is a bit of a tongue-twister, and I wonder whether the noble Lord, Lord Wedderburn, and his noble friends believe this particular jolly phrase to be a "catch-all" for misdemeanours of any sort so far as Clause 48 and, indeed, Sections 188 and 28 are concerned.
The effect of this amendment would be to make possible the initiation of disqualification proceedings on the basis of a judgment by a non-judicial officer—and that would be an inspector—who was engaged in a procedure of inquiry when that particular judgment taken by the inspector (or perhaps there might be two of them) involved the inevitably broad assessment of an individual's performance in order to take a view as to whether, in the words of the amendment, the individual had been,
"guilty of culpable malpractice in relation to the promotion, formation, management or liquidation of a company".
The primary purpose of an investigation under the Companies Acts is, first, to establish the facts where prima facie some irregularity has been shown in the way that a company has been run, and, secondly, to report those facts to the department. I hope that the noble Lord, Lord Wedderburn, would take heart from the words of Lord Justice Buckley in the very well known case concerning the Pergamon Press. Lord Justice Buckley said this:
"The function of an inspector is an inquisitorial function. His duty"—
that is, the inspector's duty—
"is to investigate the affairs of the company and report on them to the Board of Trade. It is not a judicial function".
I think those words are very relevant. It seems to us, following from what Lord Justice Buckley had to say, that the assessment of guilt is the job of the courts, and not of the inspectors. Also, the expression "culpable malpractice" is one which it is certainly not very easy to define. We think it goes a little way towards the "catch-all" phrase.
But of course we agree with what the noble Lord, Lord Wedderburn, had to say, that inspector's reports can be used for purposes of instituting proceedings. Indeed, very often, and in almost all cases, they are. But it is one thing to use these reports as a basis for proceedings, and quite another to permit an application to a court for disqualification from taking part in the management of companies from that report alone. Of course, under Section 188 of the 1948 Act, in subsection (1)(b)—and this enables an application for disqualification to be made because of the appearance of guilt in the course of a winding-up—the assessments contained in an inspector's report could be used under paragraph 1(b). I hope the Committee will bear with me when I suggest that such assessments would be far narrower and far more closely related to specific evidence which had come up or been made available to an inspector. One example could be that

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the evidence might suggest, on the face of things, a breach of a particular prohibition of the Companies Acts on loans to directors of the company concerned. That is one example. We think these assessments would be far narrower than the view as to whether any individual's conduct, no doubt over the course of some time, could be regarded as demonstrating the fairly broad phrase of the noble Lord, "culpable malpractice".
There is one final point which I would also mention to the Committee. The proposals in the amendment moved by the noble Lord, Lord Wedderburn of Charlton, would greatly handicap inspectors for this reason. The risk that witnesses would not co-operate with the inspectors would be greatly increased, we think, as they might fear that the chance of attracting such a generalised and arguably subjective criticism as that of guilt of "culpable malpractice" would outweigh the consequences of silence. That is the detailed argument. It is lengthy and I hope it has gone some way to explain our misgivings to the noble Lord, Lord Wedderburn.
Lord Wedderburn of Charlton: It is necessary to say something more on the Minister's reply. He was kinder to our drafting than was the noble Lord, Lord Trefgarne, but I have to be less than kind in my response to the rest of what he says because this is not an occasion where the Bill is simply consolidating previous law. It is making changes and we wish to make a few more. It is not true that investigations are only to establish facts. The noble Lord cannot have been reading any since the Savoy Hotel report of 1954. It was once the view that they should establish facts, but Mr. Milner-Holland broke through that in 1954 in the remarkable report on the Savoy and Berkeley Hotel Company. Since then, inspectors have roundly stated matters of law and consequence and conviction and value judgments. It is true, not irresponsibly—and that is why this amendment has so much virtue. It attaches to people who make these statements a great deal of responsibility. When Lord Justice Buckley was quoted in the Pergamon Press case as saying that an inspector is not exercising a judicial function, the noble Lord knows as well as I do that that is in relation to a doctrine that lawyers invent, like the doctrine of natural justice. Whether or not they get into that area of judicial or quasi-judicial power, it has nothing to do with the fact that inspectors do not make judgments. Of course they make judgments where they think it right; and they will go on doing so. They will not be prevented from using even the phrase "culpable malpractice" by knowing that the phrase might carry certain consequences. On the contrary, they would know when and when not to use it.
When the noble Lord says that the present clause in 1(b) allows the court to act where it appears that a person has been persistently in default, he is right. When he says that that would require evidence, he is right. He would also be right if he added that under this amendment, the court would act in its discretion only when it thought that the judgment of the inspector in saying that there was culpable malpractice was based on his report and, secondly and further than that, that
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it was culpable malpractice that ought to lead to the decision to disqualify.
I have to say, with all respect that I have for the vast majority of those who conduct the affairs of companies in Britain, that this debate in your Lordships' Committee is going on as though there were not a great deal of maladministration and malpractice in company affairs. It is well known to those who investigate these matters that there is a very undistinguished penumbra of sordid malpractices to the general properly-administered, excellent area of commercial, City and other company life in this country. It is our contention that, whether Ministers like it or not, they have to recognise the fact that there must be new statutory remedies and avenues in order to deal with that area of malpractice if it is not to infect many other areas of perfectly reputable commercial life. The areas of remedy and sanction at the moment are quite inappropriate. In this context, when I say that, faced with a mild and meagre little amendment of this sort, a tiny step to make it possible to say to the inspector, a respected QC or an accountant of many years' standing, "If you say it is culpable malpractice then the court could consider disqualification", the Government run a mile, what hope do we have, if that is their approach to dealing with dawn raids and concert parties and all the rest? That we shall see later. We are not allowed to see it today. In asking leave to withdraw this amendment, I express astonishment at the Government's attitude.
Amendment, by leave, withdrawn.
5.7 p.m.
Lord Lyell Lord Lyell moved Amendment No. 130:
Page 53, line 12, at end insert—
(" (3A) After subsection (6) of section 188 there shall be inserted the following subsection—
" (7) The power under section 193(2) of the Criminal Procedure (Scotland) Act 1975 to substitute a fine for a period of imprisonment shall in relation to a conviction on indictment under subsection (6) of this section be construed as including a power to impose such fine in addition to that period of imprisonment.".").
The noble Lord said: I beg to move the amendment standing in the name of my noble friend. When the Companies Act 1948 was passed, the maximum penalty for conviction on indictment for contravention of a disqualification order was two years' imprisonment. Section 30 of the Powers of Criminal Courts Act 1973 (which applied only to England and Wales) gave the crown court in England and Wales a general power to impose a fine without limit instead of or in addition to any other penalty on anyone whom they convicted on indictment. Section 193(2) of the Criminal Procedure (Scotland) Act 1975, however, gave Scottish courts which convicted a person on indictment the power to impose a fine without limit instead of a period of imprisonment.
Thus in England and Wales the penalty for the same misdemeanour is up to two years' imprisonment or a fine or both, and in Scotland it is up to two years' imprisonment or a fine—one or the other, but not both. Our policy is to bring these provisions into line. This amendment will therefore enable Scottish courts which convict someone of participating in the management of a company in contravention of a disqualification

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order to impose both the fine and the imprisonment. I beg to move.
On Question, amendment agreed to.
Clause 48, as amended, agreed to.
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 131:
After Clause 48, insert the following new clause:
("Amendment of s. 187 of 1948 Act
.Section 187 of the 1948 Act shall be amended as follows—

(a) in subsection (1) after the word "bankrupt" where it appears in the first line, insert the following words "under the law of any part of Great Britain"; and

(b) in subsection (4) delete the word "to" where it appears in the first line and substitute the words "in respect of a person who is an undischarged bankrupt under the law of ".").

The noble Earl said: To some extent, the purpose of this amendment is the same as what we have just heard from the noble Lord, Lord Trefgarne. The purpose is to ensure that an undischarged bankrupt can be prosecuted in Scotland on that account. At the present time the decided case Kay v. Lord Advocate makes it clear that a bankrupt in England who purports to be a director in Scotland cannot be prosecuted. That is clearly ridiculous and extremely undesirable. This was carefully examined by the presiding judge at the time and it is relatively clear what can be done. How this situation arose, I do not know; but I know that the earlier Acts of 1884 and 1913 were purely Scots Acts. The 1948 Act was supposed to bring it together, but in certain respects it failed to do so. The answer is simple, in that if, after the word "bankrupt" in Section 187 of the 1948 Act, one adds,
"under the law of any part of Great Britain",
it will make it quite clear that if the bankruptcy is in England prosecution in Scotland can proceed. Vice versa, it may be true that a bankrupt in Scotland cannot be prosecuted in England. I am not going to say whether that is true, because I do not know. In the meantime, I think that it is desirable that this addition to the 1914 Act should be made. I beg to move.
Lord Trefgarne: I understand that my noble friend's amendment has the backing of the Law Society of Scotland, which has suggested that the expression "undischarged bankrupt" in Section 187(1) of the Companies Act 1948 would extend to such a person regardless of whether the bankruptcy procedure was in an English or a Scottish court, were it not for the terms of subsection (4) of that section. Since that subsection amends subsection (1) so that the undischarged bankrupt in Scotland must seek the leave of the appropriate Scottish court, and as an English bankrupt cannot obtain such leave, it is argued that the effect of Section 187 is to enable an English undischarged bankrupt to act as a director of a company despite the law and courts of Scotland. It may also have the opposite effect—geographically speaking—that a Scottish undischarged bankrupt may be able to act as a director in England.
We believe that there are substantial arguments which suggest that Section 187 does not contain these alleged loopholes. The application to Scotland of
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subsection (1)—which is provided by subsection (4)—appears to be in relation only to the leave which may be sought by an undischarged bankrupt of the court to manage a company and the effect therefore seems to be that, as far as an undischarged Scottish bankrupt is concerned, the appropriate court is that by which sequestration of his estate was awarded. Thus the offence itself—of taking part in the management of a company—would, if in relation to a company in Scotland, lend itself to proceedings being taken in Scotland if the defendant were an undischarged bankrupt acting without leave from the appropriate court, whether that court be English or Scottish.
I am advised that a similar view would be taken in relation to an undischarged Scottish bankrupt managing a company in England. The 1948 Act is, after all, an Act applying both in England and Scotland and, where no provisions for leave of the court are included, the same term—"undischarged bankrupt"—is used, as for example in the disqualification of such a person from being a manager or receiver in Section 367 of that Act. Section 122 of the Bankruptcy Act 1914 provides that the courts in England and Scotland are to be auxiliary to each other. Moreover—and, personally, I find this a compelling argument—Section 187 and its predecessor in the Companies Act 1929 has not been challenged in the way suggested at any time. I hope that I have succeeded in laying the fears of my noble friend to rest and that he will see fit not to press his amendment.
The Earl of Selkirk: The difficulty is that what the noble Lord has said is not correct. It has been challenged on the only occasion that I know—I expect the noble and learned Lord the Lord Advocate can tell me a lot more than I know about this—and it has been decided that a prosecution could not proceed. I shall give the noble Lord the case. It occurred a few years ago. It was the case of Kay v. The Lord Advocate, which I am told was very carefully examined by a distinguished judge (Lord Mackintosh) at great length, and at the end of the day he came to the conclusion that he could not maintain the prosecution. He suggested that these words were essential. This is an academic point; I do not want to press it further. But I must sincerely ask the noble Lord to look at it again. It would be clearly absurd if anyone as an undischarged bankrupt acted in Scotland or vice versa. He must be capable of prosecution. I ask the noble Lord to look very carefully at that again.
Lord Trefgarne: I must confess that I do not have in front of me all the details of the case to which my noble friend refers. With my noble and learned friend sitting beside me on the Bench (and either he or his predecessor were apparently concerned in the case to which my noble friend refers), it would be right if we considered carefully what my noble friend has said, and, if necessary, returned to this point at a later stage. I shall undertake to do that and I hope therefore that my noble friend will not press the amendment now.
The Earl of Selkirk: I am grateful to the noble Lord. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 49 agreed to.
5.16 p.m.
Lord Monson Lord Monson moved Amendment No. 132:
After Clause 49, insert the following new clause:
("Shareholders' Proxies
.—(1) In all instances where a Company sends forms of proxy to its shareholders for use at a meeting of the shareholders, such forms shall be reply-paid.
(2) This section shall come into force six months after the passing of this Act").
The noble Lord said: First of all, let me say that do not intend to press this amendment as it stands. For one thing, I found the drafting somewhat difficult and it is almost certainly imperfectly drafted. For example, no penalty is provided for non-compliance with the provisions of the suggested new clause. Furthermore, I want to hear the views of the Committee, both on the principle and on the detail of this amendment, before deciding on how best to proceed. On the other hand, I must stress that this is a good deal more than just a probing amendment. I have been concerned with this matter for some years now. Companies Bills with a Long Title flexible enough and all-embracing enough to permit an amendment such as this one do not come before Parliament so often that one can afford to neglect an opportunity of putting things right.
The purpose of the amendment is to provide a very modest degree of extra protection for small shareholders. It has long been my contention that the small shareholder gets something of a raw deal. This is not only bad for him or for her but bad for the country. The more the equity of public companies becomes concentrated into fewer and fewer hands—which, by the nature of things, must be institutional hands—the more the whole free enterprise system becomes endangered.
The small shareholder tends to be regarded by unions and by most of the Left as a tiresome irrelevance deserving of very few rights and very little consideration. He tends to be neglected by the institutional shareholders, with a few honourable exceptions. He tends to be surreptitiously looked down upon by management and boards of directors for his gullibity and ignorance. It is true that many shareholders are somewhat naïve and not well versed in financial or commercial matters, but that is no reason for depriving them of their rights.
Since the early 1960s, his dividends are very unlikely to have kept pace with inflation; and certainly the capital value of his shareholdings is extremely unlikely to have kept pace with with inflation unless he has been exceptionally clever or exceptionally lucky. Futhermore, since the debacle of 1974 and 1975—largely consequent upon the secondary and tertiary bank boom of 1973—many shareholders will have lost every single penny that they have invested in certain publicly quoted companies.
The larger shareholders are likely to have got wind of how things are going wrong before a company finally collapses and to have got out before this event. The small shareholder, on the other hand, has in many cases been left with a pile of share certificates quite worthless for anything other than wall papering the "loo". It is sometimes argued that shareholders who are unhappy with the way that their company is run should attend the annual general meetings
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or extraordinary general meetings in person. That is all very well if one happens to live on the spot. For anyone who lives, say, in Yorkshire, to come to London to attend an annual general meeting or any other meeting is likely to cost at least £25—if the meeting is held at a reasonable hour. That figure is probably more than likely to be in excess of the total net dividend received during the course of the year. If the meeting is at an inconvenient hour, the shareholder will have to spend the night in London, and Members of the Committee know how much that will cost him.
The next argument goes something like this. If he cannot afford to attend in person, at least you cannot seriously claim that he could not afford the cost of a stamp to register his protest by means of a proxy. Of course that is technically correct, and if there were a genuine chance of his vote tipping the balance and forcing the company to act in a way other than the way in which it intended to act, no other course could be urged upon him. But where that possibility is remote or non-existent, let us think of the practical difficulties. If he has no stamp available, is it really worth his while walking a mile or half-a-mile to a post office or, if he lives in the north of Scotland or in mid-Wales, driving perhaps 20 miles to the post office, with petrol at £1·50 per gallon and queuing for 20 minutes to buy a stamp?—knowing full well that because of institutional apathy and substantial director shareholdings his protest can be no more than a token one, having no effect on the outcome of the vote.
I would submit that even though his vote may be only a token one—a protest, as it were—he should be given by law every facility for registering a protest against, for example, empire building, where he sees a company making an acquisition on far too high an earnings multiple merely for the purpose of aggrandisement, as happens in many cases to my certain knowledge. Or for registering a protest against the directors' remuneration rising by 50 per cent. in a year when they have pegged the dividend—that has also happened, to my certain knowledge. Or for registering a protest against a company buying a house in Belgravia for the use of the chairman at a rent of £5 a week, in a year when the dividend has actually been cut. That, or something very similar, has happened in one case, to my certain knowledge.
It is a curious thing that under the 1948 Companies Act there is no absolute obligation to send proxy forms at all. Section 136 of that Act merely stipulates that if a company sends proxy forms to some shareholders it must send them to all shareholders, and a fine of £50 is prescribed for non-compliance. The requirement to send proxy forms to all shareholders of quoted companies is not a statutory requirement but a Stock Exchange requirement, which is why I have made no reference to the 1948 Act in my amendment, though it may yet be thought desirable to do so when tabling my amendment at Report stage.
I think things have reached the stage when shareholders in public companies do need the protection of the law and not only the partial protection conferred by the Stock Exchange. Here I want to make it clear that I am not for a moment suggesting that the minority of companies which do not send reply-paid proxies necessarily treat their shareholders badly and that the majority who do invariably treat them well. I am

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not suggesting that is the case at all, but it does not alter the principle of the thing.
The most compelling reason for agreeing to the principle, if not to the precise wording of this amendment, is that at least 75 per cent. of companies do send reply-paid proxies of their own free will. To take a dozen household names at random, if Debenhams, European Ferries, Guardian Royal Exchange Assurance, Hawker-Siddeley, ICI, Lonhro, the Rank Organisation, Shell and Standard and Chartered Bank, feel they can voluntarily send reply-paid proxies without any harm to the smooth running of their businesses or to their profits, surely Dunlop, GEC and Grand Metropolitan should be able to do the same. I beg to move.
Lord Lloyd of Kilgerran: I should like briefly to support the general theme of the noble Lord, Lord Monson, on this matter. I think he is wrong about one of the companies when he referred to a very large company which when they send out proxies, send out pre-paid postcards. I had one from ICI, if I may declare an interest, only a few days ago and that was not prepaid. If the answer by the company is that this is a costly method and increases the cost of the matter, may I respectfully suggest that many of these companies could save a lot of money in the advertising they circulate with the annual reports. These glossy reports they issue indicate that they have lots of money to spare when sometimes the contrary is true. I should think, as a matter of courtesy, that if a big company wants a reply it ought to stamp the postcard which is sent out.
Lord Lyell: In replying to the noble Lord, Lord Monson, far be it from me to curtail his tour of the major companies of our economy, nor indeed to take issue with the noble Lord, Lord Lloyd, about what he calls glossy advertisements. He seems to regard these company reports as somewhat wasteful. The noble Lord is, of course, an expert in wading through page after page of detailed legal submissions over patents and so on, but I would suggest the average investor is pleased to see the performance of his company set out in detail and in pictorial form which is easily visible and easily digestible. I wonder whether the noble Lord, Lord Lloyd, is right in criticising any company, whatever its size, for making its affairs more legible and more agreeable to the public and indeed to its shareholders—
Lord Lloyd of Kilgerran: Is the noble Lord saying that it is a matter of Government policy and that they are supporting the actions of these large companies in sending out these glossy things?
Lord Lyell: May I respectfully suggest to the noble Lord just one word: patience. I am coming to his views, and especially when I am allowed to proceed in replying to the noble Lord, Lord Monson. In considering this amendment I hope the Committee will allow the Government to state their view on whether it really is a proper function of company law to regulate such details of the administration of companies. Very often these details may be important, as the noble Lord, Lord Monson, said. Nevertheless they are details and
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of course a company may already, at its own discretion, encourage shareholders to take part in decision-making by sending reply-paid proxies. We support that, but I must say that the Government see no good reason why the law should compel a company to do so.
I am afraid that the amendment does not explain how this provision would be enforced. For example, would the provision which is set out in the new clause be subject to a criminal sanction, to be enforced by some investigative agency or possibly even the police? Also, would a shareholder, if by some misfortune he did not receive his reply-paid proxy form, be entitled to have the vote made void if he applied to the court? These two examples are not necessarily very far-fetched, especially as I not infrequently have to speak about the British Telecom and Post Office services—what happens if something goes astray in the mail? These examples illustrate the difficulties of using the law in the way which is proposed by the noble Lord, Lord Monson, to promote more active participation by shareholders. The Government are all in favour of encouraging an effective shareholding democracy, but we wonder whether this new clause is the proper way to go about it.
In addition, there is a provision that this section should not come into effect until six months after the enactment of the Bill. We wonder whether this is intended to allow companies time to get through all those proposals which they believe would encounter strong opposition from shareholders who were unable to pay the price of postage. I hope that subsection (2) of the proposed new clause is not intended to become a "rogues' charter" before the laudable intentions expressed in the clause would come into effect. We accept that the underlying intention of the new clause is indeed honourable and we support it, but we would point out that the proposal to put his views into law is not necessarily appropriate in the Companies Act as we have it today.
Lord Bruce of Donington: The noble Lord, Lord Lyell, has been a little ungenerous to the noble Lord, Lord Monson, who, as I recall, explained at the outset that the clause was far from finally drafted and described this as a kind of probing amendment. I should not have expected the noble Lord, Lord Lyell, to go into such full documentation concerning all the technical defects of the Bill, in view of the very tentative way in which the amendment was proposed. Moreover, the noble Lord reacted a little sharply to the suggestion of the noble Lord, Lord Lloyd of Kilgerran, that company reports tended to be a little on the lush side. His reaction that it is unwise to go into the minutiae in a clause of this kind comes a little oddly from him. After all, in Part I of the Bill the Government went into enormous detail in actually setting out the precise form in which company accounts should in future appear. It does not really lie in the mouth of the noble Lord, Lord Lyell, to accuse the noble Lord, Lord Monson, of trying to legislate in too much detail. The Government are already guilty, and over-guilty, on that score in their treatment of Part I of the Bill.
The suggestion of the noble Lord, Lord Monson, is a perfectly reasonable one. But there is another technical defect to which, with all due respect, I should

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like to refer. The amendment says "a company" but I should have been far more satisfied had the noble Lord used the words "public limited company" rather than covering all companies. But, again, that is a purely technical matter. I should have thought that the general principle that companies should send out proxies—and, in the main, these tend to be public limited companies; the PLCs as they will eventually become—was a very good thing for the Government to take seriously. As the noble Lord, Lord Monson, said—and I shall probably remind him of this in some future economic debate—the control of most companies tends to be concentrated in fewer and fewer hands. I may use that point later in another political or economic context. But that is undoubtedly true and the small shareholder is entitled to a little consideration.
Therefore, I should like the noble Lord, Lord Lyell, and the Government to take the suggestion of the noble Lord, Lord Monson, a little more seriously with a view to seeing whether something can be done about it. It could easily be done within this Bill. It is not beyond the ingenuity of parliamentary draftsmen, however overworked they are in other spheres in producing scores of more and more detailed amendments, to produce a short series of clauses covering this point. I therefore hope that the noble Lord will give this matter rather more consideration than it appears to have been given in the brief which was provided for him.
Lord Mancroft: Before we leave this point, may I make a short comment on the observation of the noble Lord who was speaking from the Liberal Front Bench about glossy brochures in annual reports? There has always been criticism of these and it is very easy to criticise. Companies do not do this lightheartedly; they go into it very carefully. Shareholders know perfectly well that these reports must be expensive to produce, take time and trouble and cost considerable postage. On the other hand, speaking from my own experience, I can assure the noble Lord that many shareholders welcome detailed information about their companies in language which they can understand and with pictures showing what is going on, rather than a piece of paper which only a qualified accountant can possibly explain to them. As the noble Lord, Lord Monson, suggested, they may live 25 miles, if not 250 miles, from the nearest qualified accountant.
There is one more virtue of those glossy reports which the noble Lord so despised, as they enable a company to remind its shareholders what it sells, what its commodity is, and also helps to encourage them to buy those goods or services, and to pass that information to their friends. The noble Lord would be very much surprised if he asked any average shareholder "You are a shareholder in X and Company. What do you make? What do you sell? What are your goods?" If your Lordships look at the Financial Times on any morning you like, you will find at least half a dozen reports of companies which give no indication whatever of what each company sells, what goods it has to offer or what services it has to offer. You could not tell whether it was ships, shoes, or sealing wax. Though I discourage unnecessary waste or flamboyance, I therefore believe that we should think very carefully before wholly agreeing with the
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noble Lord's attack on these glossy pieces of advertising. They sometimes do a lot of good.
Lord Lloyd of Kilgerran: I am sorry if I disturbed the noble Lord who has just sat down. But at this time of economic stringency, I am satisfied that many of the glossy reports which are issued by large companies could be curtailed in the function which they set out to perform. I agree that a company must disclose what it is making, but there are other ways of doing that. The noble Lord and I must differ in our views about these reports which are issued from time to time.
Lord Lyell: I hope that I shall not take any time from the noble Lord, Lord Monson, but the noble Lord, Lord Bruce, made various criticisms of my reply. I have nothing to add. My case rests. As regards the glossy brochures, the noble Lord, Lord Mancroft, is far more eloquent than I. As regards the amendment of the noble Lord, Lord Monson, the Government do not treat the noble Lord's views with flippancy, but I hope I managed to suggest to the noble Lord that we believe that company law, and this Bill, is not necessarily the best method of achieving what he wants. We believe that the law should not compel companies, but it should not go out of its way to make difficulties for any companies which wish to aid their shareholders.
Lord Monson: First, let me say how grateful I am to the noble Lord, Lord Lloyd of Kilgerran, and the noble Lord, Lord Bruce of Donington, for their support. The noble Lord, Lord Lyell, asked: Is it a proper function of company law to go into such detail in connection with shareholder protection? If it is not a proper function of company law, why, then, was Section 136 of the 1948 Act, which deals with proxies in a slightly broader sense, ever passed? And I think it is generally accepted that since 1948 things have started to go wrong, so far as small shareholders are concerned.
I accept one or two of the criticisms of detail made by the noble Lord, Indeed, I said at the outset that the amendment was defective and that it lacked any provision for penalty. The answer there is probably to produce an amendment which refers back to Section 136 of the 1948 Act, which provides for a fine of £50. That would meet that particular criticism, and would be an appropriate penalty. I cannot believe that any public company—and here I take the point of the noble Lord, Lord Bruce, that the amendment ought to refer to public companies only—would fail to do its duty in this regard, if Parliament so decided.
This is a legitimate matter for Parliament. I think all parties are agreed on the general need for consumer protection. This is, in a way, a measure of consumer protection—or even producer protection. If shareholders had not produced their money in the first place for the fixed and working capital of companies, the companies would never have reached their present size and shape. But this is not the moment to proceed with this matter. It requires a little more examination. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 50 to 53 agreed to.
5.40 p.m.
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 133:
After Clause 53, insert the following new clause:
("Amendment of s. 106 of 1948 Act
. In section 106 of the Companies Act 1948 delete the word "England" where it appears for the third time and substitute the words "United Kingdom".").
The noble Earl said: This amendment is intended to put Scotland in a pari passu position in regard to charges on companies. Part III of the 1948 Act deals with the manner in which charges can be created against companies. This makes it quite clear that unless a charge is registered, it will become void. If we look at this carefully, in particular at Section 106, we see that any property in England which is acquired by a company which is incorporated outside England has to be registered in England. In point of fact, many companies in Scotland have property in England. This has arisen through the practice in Scotland of having what are called floating charges covering the whole of the assets of a company, whereas in England I understand that fixed charges are much more used.
What it means in effect is that if a charge is registered in England, whether the property be in Scotland or elsewhere, that is enough, whereas if a charge is registered in Scotland and includes any property in England, it has to be registered in England at the same time. I submit that this is quite unnecessary. It should be on an equal basis for both countries. This can very easily be brought about by the amendment to Section 106 which I have moved.
But there is a still more important point which could lead to difficulty. It arises particularly in relation to what is called Section 106K, which was brought in under the 1972 Act. If a foreigner comes to this country, does business in Scotland, and takes a charge against it, he may not know that if there is property in England it must also be done in England. This is an unsatisfactory situation which I believe can very easily be put right by my amendment. It means changing the word "England to" "United Kingdom". In most cases when we talk about a foreign country we do not really mean Scotland, so "United Kingdom" is very much more suited to this part of Section 106 than "England". I beg to move.
Lord Trefgarne: As my noble friend has explained, the purpose of this amendment is to remove an inconsistency in the present law relating to the registration of charges. By virtue of Section 106K of the 1948 Act, a non-British company which has a place of business in Scotland is required to register charges on Scottish property. I emphasise non-British because the point here is that the requirements do not apply to English companies. By virtue of Section 106, in contrast, a non-English company which has a place of business in Scotland is required to register charges on English property. I emphasise non-English because, as my noble friend has pointed out, the requirement accordingly rests on Scottish companies. Hence the certain sense in Scotland of being discriminated against which my noble friend has eloquently expressed.
Let me say straight away that the Government accept that my noble friend has identified an anomaly in the Acts which it would be right to amend. We
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therefore accept in principle that the two provisions to which I have referred should be brought into line. However, we cannot accept my noble friend's amendment as dealing adequately with the problem. For example, it would create a new anomaly since Section 106 would refer to non-United Kingdom companies whereas Section 106K would still refer to non-British companies. If there is to be a change—and as I say the Government are sympathetic in principle—it should be to put Section 106 on a par with Section 106K in applying the requirements to companies incorporated outside Great Britain. The Government see no reason to disapply either provision to Northern Ireland companies, who are not in other respects subject to the Companies Acts. I hope that in the light of what I have said my noble friend will see fit not to press his amendment. The Government will table an appropriate amendment to deal with this point at a later stage of the Bill.
The Earl of Selkirk: I can only thank my noble friend very much. I look forward to seeing the amendment in due course. I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
Clause 54 agreed to.
Lord Robertson of Oakridge Lord Robertson of Oakridge moved Amendment No. 134:
Before Clause 55, insert the following new clause:
("Disclosure of names in which shares are to be registered
. The following section shall be inserted after section 33 of the 1967 Act—
33A.—(1) Any obligation under section 33 of this Act to notify the acquisition of shares shall not be regarded as having been discharged unless the name or names in which the shares are or are to be registered is included in the notification.
(2) Any obligation under section 33 of this Act to notify the disposal of shares shall not be regarded as having been discharged unless the name or names in which the shares are registered is included in the notification.".").
The noble Lord said: I was very grateful to the noble Lord, Lord Trefgarne, for his assurance earlier this afternoon that later on the Government would be introducing amendments to the Bill to cover the questions of disclosure and concert parties. My amendment is concerned with an aspect of disclosure which has some bearing on the question of concert parties, and is very similar to Amendment No. 152 which was referred to by the noble Lord, Lord Lloyd of Kilgerran.
I hope the Committee will not think that I am presuming on their time if I speak about my amendment. It seems to me that discussion of the Government's amendments is inevitably going to be telescoped. Therefore, it is right and proper that points such as this should be aired at this stage. I should say that I have a special interest in it as a stockbroker.
The aim of the amendment is that a person making a notification of an acquisition or disposal of shares under Section 33 of the 1967 Act, as amended by Section 26 of the 1976 Act, should be obliged to declare not only that he has made the acquisition or disposal but also the name or the names in which the shares are to be registered or, in the case of a disposal, the name or names in which they are registered at the

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moment. The notifications to which I refer relate to shareholdings carrying 5 per cent. or more of the company's voting rights.
Under the existing law, it is possible by the use of nominee names for a company to be aware of a shareholding of over 5 per cent. but not to be able to identify it on its register of members, which it is required by Section 110 of the 1948 Act to keep. The over 5 per cent. shareholdings will appear on the register of substantial holdings kept under Section 34 of the 1967 Act. But it may very well not be possible for the company to link the two registers together. Inability to make this link will hinder a company from readily identifying those who may be building up a position from which to influence or, indeed, to control the affairs of a company. Of course, a company can use its powers under Section 27 of the 1976 Act to get nominees to declare the names of the beneficial owners of the shares in their name, but such a procedure, first, can be slow—and in many instances time is at a premium—and, secondly, does not always work, as we have seen in the case of the Dunlop situation.
To give an example of what I mean, you could have a situation where, say, the Section 34 register showed several large holdings while the register of members showed a number of nominee holdings accounting for a slightly larger number of shares than the total of the Section 34 holdings. The company might well want to try to find out who owns the balance of the shares in the nominee holdings. Under the present law of being unable to link up the two registers, it might well have to serve notices on all the nominees, which would take time and involve extra work.
If the amendment were agreed, most of the nominee holdings would be able to be linked with the Section 34 register and perhaps only one notice might be needed. I maintain—and I believe that this view is shared by the Stock Exchange and by the Council for the Securities Industry—that my amendment would reduce uncertainty to companies, to their shareholders, to their customers and to the public at large and would be a step towards avoiding the kind of situation which we saw with Consolidated Gold Fields. It would be very helpful if the Minister could say that serious consideration will be given to this point in drawing up the amendments to provide legislation on disclosure and concert parties. I beg to move.
Lord Trefgarne: The noble Lord has done the Committee a considerable service by drawing this particular point to your Lordships' attention. I readily give the assurance for which the noble Lord, Lord Robertson of Oakridge, asks—namely, that this matter will be taken carefully into consideration in the drafting of the Government's new proposals which I announced earlier this afternoon. I hope that, with that assurance, the noble Lord will feel able to withdraw his amendment.
Lord Robertson of Oakridge: I am very grateful for the reply given by the Minister and I readily beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 55 [Further disclosure of information permitted in certain cases]:
5.50 p.m.
Lord Lyell Lord Lyell moved Amendment No. 135:
Page 54, line 39, leave out from ("circumstances)") to end of line 41 and insert ("the following paragraphs shall be substituted for paragraphs (c) to (f)—").
The noble Lord said: In moving this amendment, I hope it may be convenient for me to speak to Amendments Nos. 136 and 137 as well. These are drafting amendments. Clause 55(1) adds further paragraphs to Section 111(1) of the 1967 Act, which sets out the circumstances in which information obtained under Section 109 of that Act may be disclosed other than to a competent authority without the prior written consent of the company concerned. As drafted, Clause 55(1)(b) could be construed as deleting Clause 55(1)(a). This is a point which has been made by both the Law Society and the Consultative Committee of Accountancy Bodies.
The amendments therefore redraft Clause 55(1) to cure this defect. As redrafted, Clause 55(1) substitutes two new paragraphs, identified as (da) and (c), in Section 111(1) of the 1967 Act for paragraphs (c) to (f) of that subsection. Paragraph (da) enables information or documents obtained under Section 109 of that Act to be disclosed by an inspector appointed under Sections 164, 165 or 172 of the 1948 Act or Section 32 of the 1967 Act in the course of his investigation for the purpose of the examination of any person. Paragraph (c) of the clause enables information or documents to be disclosed for the purpose of enabling the Secretary of State to exercise, in relation to the company concerned or any other body, any of his functions under the Companies Acts 1948 to 1981 and certain other Acts mentioned in Clause 55(1). This includes disclosure of such information when it is incorporated in a report of an inspector which is published or disclosed by the Secretary of State in the exercise of his functions under Section 168(2) of the 1948 Act, which section refers to the publication and disclosure of inspectors' reports. Disclosure in these circumstances is already provided for in Section 111(1)(d), which accordingly is no longer required. I am afraid that that is a rather complicated explanation. I beg to move.
The Deputy Chairman of Committees (Lord Derwent): If the noble Lord, Lord Ponsonby of Shulbrede, is going to speak to Amendments Nos. 135, 136 and 137, perhaps at this stage I ought to point out that if Amendment No. 137 is passed I shall not be able to call Amendment No. 138.
Lord Ponsonby of Shulbrede: I am sure it is for the convenience of the Committee to speak to these three amendments at the same time. They cover the same point as my Amendment No. 138 and we certainly agree to Amendments Nos. 135, 136 and 137 being made.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendments Nos. 136 and 137:
Page 55, line 4, leave out (" and ").
Page 55, leave out lines 5 and 6.
The noble Lord said: I beg to move these two amendments en bloc.
On Question, amendments agreed to.
[Amendment No. 138 not moved.]
Clause 55, as amended, agreed to.
Lord Seebohm Lord Seebohm moved Amendment No. 139:
After Clause 55, insert the following new clause:
("Amendment of 1967 Act
.—(1) The following subsection shall be inserted after subsection (4) of section 28 of the 1967 Act—
"(4A) A person shall be deemed to be interested in shares of a company if the interest has been acquired pursuant to an agreement or arrangement (whether legally binding or not) to which that person was a party and which includes an understanding as to the exercise, holding or disposal of the interest by the person to whom the shares are transferred in the first instance."
(2) Section 33(5) of the 1967 Act is amended by the addition at the end of the following words—
"It shall not be open to the promoter of an agreement or arrangement to say that he was not aware of the acquisition of an interest under the agreement or arrangement.".").
The noble Lord said: I am sorry to raise this matter again. We have discussed it at some length when dealing with Amendments Nos. 123 and 125 and I do not mean any discourtesy to the noble Lord, Lord Trefgarne, who, I am glad to say, has been very kind in suggesting that he will bring forward Government amendments to cover the various points that we raised earlier this evening. The Council of Security Industries is in fact sitting in a minefield and they are extremely worried about the situation. This clause says, quite simply, that where you are interested in shares you must report their acquisition if you are a party to an agreement or understanding under which shares are acquired and the agreement or understanding provides what can happen to the shares after they come into the hands of the first recipient. A clear obligation to report is placed upon the promoter or organiser of such a scheme.
Noble Lords are no doubt aware of other problems in this field. Fertile minds are always at work to devise means of concealing who are the beneficial owners of shares. My own view is that we must tackle these questions one by one and not wait to pursue the rainbow end of a comprehensive solution to all outstanding problems in this field. I make no claim for my clause beyond saying that it plugs an obvious and important gap in the reporting requirements and I cannot see that it could conflict with any further legislation put forward by the Government. I beg to move.
Lord Trefgarne: I am prepared to reply to the noble Lord's amendment at some length but it may be for the convenience of your Lordships at this particular juncture if I do not do that and ask for the noble Lord's understanding in respect of the future clauses that we have undertaken to bring forward. They will be as comprehensive as we can make them in the circumstances. Some of the points raised by the noble Lord in his amendments are very pertinent ones of which we shall certainly wish to take account in the drafting of our amendments. Really very much the same arguments apply as those which I offered to the noble Lord, Lord Robertson of Oakridge, just now. I hope that,
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on receipt of that assurance, the noble Lord will not wish to press his amendment.
Lord Seebohm: I want to make only one more comment and that is that, in view of the strong feeling that has been expressed by a number of people, I hope that every effort will be made by the Government to bring forward the amendments to your Lordships' House so that we may perhaps see them at the Report stage. If that can happen I shall be very happy.
Lord Trefgarne: I undertake to use my best endeavours to that end, but we are in the hands of parliamentary draftsmen and others and I cannot give a categorical assurance.
Lord Seebohm: Perhaps all priority will be given to it and, in that case, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.58 p.m.
Lord Wedderburn of Charlton Lord Wedderburn of Charlton moved Amendment No. 140:
Insert the following new clause:
("Disclosure of information concerning contracts of employment of directors
.The following provisions shall cease to have effect:

(a) section 54(6)(b) of the 1980 Act (substantial contracts etc. with directors and others to be disclosed in accounts);

(b) section 26(3A) of the 1967 Act (directors' service contracts or memorandum thereof to be open to inspection by company's members); and

(c) section 61(3) of the 1980 Act (extension of s. 26 of the 1967 Act) insofar as it relates to subsection (3A) of section 26 of the 1967 Act.").

The noble Lord said: This takes us away from the area of concert parties into a small attempt at clarification and adjustment of the Companies Acts of 1967 and 1980. The amendment has two parts: the first deals with directors' employment contracts and the relationship of Section 26 of the 1967 Act and Section 47 of the 1980 Act. I am sure your Lordships will be aware that under the 1967 Act directors' contracts of service with their company have to be placed on a register kept by the company under Section 26.
This of course requires a feat of judgment on the part of those who are administering the company in order to keep distinct the directors' contract of service—contract of employment in the strictest technical sense—as opposed to the directors' contract for services with his company; for example, usually a contract of consultancy, or something of that sort, where he might be regarded not as an employee of the company (which despite the older legal authorities he can now be under certain types of contract) but as a consultant or independent contractor or self-employed person in respect of that contract, whichever of the many different legal terms are used.
The distinction between the contract of service and the contract for services has become more and more mysterious as the law has progressed. It now requires a feat of judgment equal only to the Court of Appeal, or indeed, since the noble and learned Lord the Lord Advocate is with us, the Court of Session. Cases are being heard every month where—to take one example

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of last year—a sheet metal worker who had worked for many years in a factory on the basis that he was a self-employed person was found, to the interest and astonishment of the Inland Revenue, to be an employee after all.
It cannot be very easy for those who are administering company affairs to be sure they are putting on the right register only contracts of service of the directors. It was made more difficult for them to fulfil their task in 1980, when Section 47 of the 1980 Act was passed, because then if there were any agreement in respect of which the director can be in a relationship of employment with his company for five years or more, then the contract has to be approved by the general meeting. "Employment" here includes contracts for services as well as of service. So there was an overlap between the two provisions.
But the third part of the jigsaw that makes it a crazy paving was Section 54(6)(b) of the 1980 Act, which it would be the ambition of paragraph (a) of this amendment to delete, because that paragraph exempts from the normal requirement to make disclosure in the accounts of material contracts, which normally include employment contracts in the wider sense, the contract of service. So those who administer the company have yet again to get it right. As is suggested by Professor Gower in the supplement to his 1981 textbook on company law—he is an adviser to the department, so I live in hopes for this part of the amendment—these provisions are inconsistent and confusing. Indeed they are. Section 47 requires prior approval of both types of contract where there is five years' employment in both senses at issue, but Section 54 requires disclosure in the accounts of all material contracts, including those contracts, unless they happen to be technically contracts of service. And Section 26 of the 1967 Act requires contracts of service alone to be put on the register of contracts of service of the directors with the company's office.
It seems to me that the Government can resist paragraph (a) only if they can tell your Lordships' Committee why a contract involving six years of service as opposed to six years of services is so much more insignificant that it need not be put in the accounts. That is the only question I put to the Government, and it is for once a very simple question and I hope I shall receive a very simple reply, that they accept it.
The second part of the amendment is a rather different matter, but also caused by the 1980 Act. In a sense this is a genuine request for information on the part of my noble friends and myself in regard to the register kept by a company of the contracts of service of directors. The 1980 Act, in our opinion, made an admirable amendment, an extension, by requiring the register to include contracts of service with subsidiaries. That would be untouched by the rest of the amendment. But the 1980 Act went on to state that where the contract of service of the director involved him in working wholly or mainly abroad, then it need only state the parties to the contract and its duration. We tried at the time to find out why it should be that the contract of service of a director who was working within the United Kingdom should state all its relevant or material terms, but not that of the director working abroad.
Indeed, there is a simple question to be answered by the Government on this matter, too. Is it not the case that a shareholder in a shareholders' meeting is equally entitled to know the material terms, and especially remuneration, of a director who works mainly abroad, where the shareholders' meeting wishes to assess whether or not to use its power to dismiss him under Section 184 of the Companies Act 1948? Surely one of the most important facts in respect of control of the directors by the shareholders' meeting—which is very much the model of the 1980 Act, however materially real or significant it may be—is that the shareholders' meeting has a right to know these things, because it is the body which controls the directors. Why should it be that the material terms of a director's contract abroad should be totally obfuscated so far as the general meeting of shareholders is concerned? That we find difficult to accept. Since we genuinely feel that paragraph (a) is just a matter of law reform, which we hope the Government will accept, in a sense in paragraphs (b) and (c) we are putting the question again to the Government as to why they insisted on this provision in the 1980 Act, to see if some explanation can be given now of what was not explained then. I beg to move.
Lord Mackay of Clashfern: So far as the first point is concerned, I accept, of course, that at the margin it is sometimes difficult to tell when you have finished with a contract of service and entered into the area of a contract for services. Where there is difficulty of that sort—and it is in a comparatively small proportion of the total number of cases to which these provisions would apply—it seems fair to conclude that the company would be prudent to disclose such a contract in both ways; that is to say, the way appropriate for a contract for service, which is in effect a disclosure to the shareholders of the company, and in the way appropriate to a contract for services, which is part of the accounts. We believe that this general distinction is sufficiently important to merit maintaining the separate treatment of the two types of contract, in view of the desirability of preserving the details of a director's contract for service from the inquisitiveness of others while preserving those details for the shareholders themselves.
So far as the overseas contract is concerned, which is the subject of paragraphs (b) and (c) of this proposed new clause, the matter was gone into with considerable care before these proposals were put into the Act of 1980. I think they were the subject of considerable discussion in your Lordships' House when these clauses came back here. I seem to remember hearing the noble Lord, Lord Wedderburn, posing rather similar questions on that occasion to those he has posed today. The situation so far as the Government are concerned is that, after careful study, and taking into account the difficulties which might be created by full disclosure of overseas contracts, we came to the conclusion that political or commercial embarrassment of sufficient importance could arise if such full disclosures were made. It was in the light of that consideration that it was decided on balance—and I accept it is quite a difficult balance—that these provisions should be put forward.
The noble Lord asked what the situation would be, for example, in relation to a proposal to dismiss a

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director. This, of course, is dealing only with statutory obligations of disclosure. It could well be that the company in general meeting would be given further information apart altogether from the statutory provisions; the company might think it wise in particular circumstances to give such information and take account of any possible difficulty for the company's business overseas that such disclosure might involve. These are the explanations, and in effect the situation as we see it has not changed from that in which these proposals were originally put into the legislation.
Lord Wedderburn of Charlton: I am very grateful to the noble and learned Lord for his response. I must admit that I am still not at all clear about the second part of the matter. I am posing the same questions and I seem to be getting the same answers. No doubt we shall come to it again on another occasion. As to the first part, I and my noble friends have to remain in disagreement with the noble and learned Lord. It does not seem to us that it is right that all the long-term contracts of service should necessarily be kept from the inquisitiveness of others whereas the long-term contracts for services are exposed in the accounts. We do not see the logic of that. But, in view of the position in the Committee, I beg to leave withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 56 [Revival of dissolved companies]:
6.10 p.m.
Lord Lyell Lord Lyell moved Amendment No. 141:
Page 56, line 7, at end insert ("or, if no consideration was received, an amount equal to the value of the property, right or interest disposed of, as at the date of the disposition.").
The noble Lord said: I beg to move Amendment No. 141. I hope that the Committee will bear with me if I briefly explain the purpose of Clause 56 to the Bill around which certainly this amendment and others to follow are framed. The effect of Clause 56 will be that in future anybody who revives a company which has previously been dissolved will be entitled to receive a cash payment which is equivalent to its assets, rather than the assets themselves, from the Crown, the Duchy of Lancaster or indeed the Duchy of Cornwall, to whom assets of a company may pass on its dissolution.
The change that I seek to outline will be in the public interest in two respects. First, it enables those to whom assets of dissolved companies pass when nobody else has a good title to sell those assets without risk that they will be subsequently reclaimed. The assets will be freed to be put to good use. The effect of the law at present can be, for example, to prevent redevelopment of derelict land and buildings for up to 20 years. Secondly, we believe that the change will benefit the public by allowing the administration of such assets, while they are the responsibility of the Crown or the Duchies, to be simplified.
Amendment No. 141 extends the provisions of Clause 56 which can cause a company which is revived within the statutory period after its dissolution, to receive due compensation for any of its assets which,
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after becoming what we attractively call bona vacantia on the dissolution, have been disposed of by the Crown or the Duchy of Cornwall under the general provisions of the clause Amendment No. 141 deals with assets which have been disposed of for no consideration. That may not be a particularly frequent occurrence, but it is a real possibility. I hope that your Lordships will agree that in such cases the company should receive compensation. The amount due to the company is expressed to be the equivalent of the value of the assets in question. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 142:
Page 56, line 11, leave out ("Chancellor") and insert ("Attorney General").
The noble Lord said: I beg to move Amendment No. 142. This is the second amendment to the clause which is labelled "bona vacantia"—Clause 56. This amendment provides that the appropriate person will represent Her Majesty the Queen in proceedings arising in connection with any liability which accrues to the Duchy of Lancaster under the main provision of Clause 56. The Chancellor of the Duchy has no standing in the courts, so the proper officer of Her Majesty in right of Her Duchy of Lancaster is the Attorney-General of the Duchy. This amendment seeks to correct that small point. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 143:
Page 56, line 21, at end insert—
("(3A) This section applies in relation to the disposition of any property, right or interest on or after the appointed day, whether the company concerned was dissolved before, on or after that day.").
The noble Lord said: I beg to move Amendment No. 143. This is the third amendment to Clause 56. Of course there will be assets which have already accrued as bona vacantia to the Crown or to the Duchy of Cornwall and are now vested in the Treasury Solicitor. This amendment makes it clear that those assets may be disposed of under the general provisions of the clause. I hope that your Lordships will agree that it would be pointless and indeed arbitrary in the case of this clause to restrict its provisions only to cases where the company is dissolved after the enactment of the Bill. I beg to move.
On Question, amendment agreed to.
Clause 56, as amended, agreed to.
Clause 57 [Channel Islands and Isle of Man companies]:
Lord Trefgarne Lord Trefgarne moved Amendment No. 144:
Page 57, line 15, leave out ("or").
The noble Lord said: I beg to move Amendment No. 144 and with the permission of the Committee I wish to speak to Amendment No. 145. In commending this amendment, I wish to explain that British company law does not extend to companies registered in the Channel Islands or in the Isle of Man, which, for convenience, I shall refer to as "island companies". In the 1948 Act they are generally treated as oversea companies but, because of the personal relationship of

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those territories to the Crown, separately identified in Section 416 as companies which, if they have a place of business in England and Wales or in Scotland, are required to deliver documents to the appropriate British Registrar, as if they were companies which he had registered. Nevertheless, they are oversea companies and this amendment by adding Section 1(7) of the Companies Act 1976 to the exceptions set out in subsection (3) of the clause, clarifies that "island companies" are required to deliver accounts to the registrar as oversea companies as provided for in Section 9 of the Companies Act 1976 and not as companies incorporated in Great Britain under the provisions of Section 1(7) of the Companies Act 1976. I beg to move.
On Question, amendment agreed to.
Lord Trefgarne Lord Trefgarne moved Amendment No. 145:
Page 57, line 16, at end insert ("or section 1(7) of the 1976 Act.").
The noble Lord said: I beg to move.
On Question, amendment agreed to.
Clause 57, as amended, agreed to.
Clauses 58 to 62 agreed to.
Schedules 1 and 2 agreed to.
Schedule 3 [Minor and consequential amendments]:
Lord Lyell Lord Lyell moved Amendment No. 146:
Page 101, line 6, after ("5") insert ("10").
The noble Lord said: I beg to move Amendment No. 146. This minor amendment to Schedule 3 is consequential on the introduction of the earlier clauses that we were discussing relating to the purchase by a company of its own shares. The amendment provides that Section 10 of the Companies Act 1948—which provides for the amendment of a company's articles by a special resolution—will be subject to the provisions of the Bill which we are now discussing. Amendment No. 121A and, above all, subsection (6) of Amendment 119 which we discussed earlier in Committeee, restrict a company's powers to amend its articles by special resolution and so Section 10 of the 1948 Act should be made subject to these provisions. I beg to move.
On Question, amendment agreed to.
[Amendment No. 147 not moved.]
Lord Trefgarne Lord Trefgarne moved Amendment No. 148:
Page 101, line 20, at end insert—
("5A. In section 170(1) (liability to pay expenses of investigations)—

(a) in paragraph (c), after the words "shall be liable" there shall be inserted the words "except where it was the applicant for the investigation and"; and

(b) in paragraph (d) for the words "the applicants" there shall be substituted the words "the applicant or applicants").

The noble Lord said: I beg to move Amendment No. 148. Clause 43 of the Bill repeals the requirement of Section 165(a)(i) of the 1948 Act that the Secretary of State must appoint inspectors to investigate the affairs
1018
of a company, if the company itself so resolves by special resolution and instead permits a company itself (in addition to prescribed minima or more of members) to apply to the Secretary of State to have its affairs investigated under Section 164(1) of the 1948 Act.
These amendments deal with the consequences of Clause 43 for Section 170(1)(c) and (d) of the 1948 Act, amended and introduced respectively by Section 40 of the 1967 Act which provides for the expenses of and incidental to investigations under Sections 164 and 165(a) to be recovered in certain circumstances.
Under Section 170(1)(c) as amended by the 1967 Act, any body corporate dealt with by the report, where the inspectors were appointed other than of the Secretary of State's own motion, that is to say, following an application by members under Section 164(1), a special resolution of the company pursuant to Section 165(a)(i) or an order of court pursuant to Section 165(a)(ii), are liable for expenses of and incidental to an investigation except so far as the Secretary of State otherwise directs. Under Section 170(1)(d) the applicants for an investigation under Section 164 (as distinct from the company itself) are liable to such extent, if any, as the Secretary of State may direct.
As I have said Clause 43 of the Bill brings to an end the requirement that the Secretary of State must appoint inspectors following a special resolution to that effect by the company, and replaces it with a provision enabling a company to apply to have its affairs investigated under Section 164(1) of the 1948 Act. Recovery of costs from bodies corporate under Section 170(1)(c) will henceforth be limited to those cases where inspectors are appointed following an application under Section 164(1) or an order of the court and the body corporate in question is not itself the Section 164(1) applicant. The amendments provide that where a company is an applicant for an investigation under Section 164(1), it shall be liable for the costs of the investigation under Section I 70(1)(d) in the same way as member applicants, and not under Section 170(1)(c) as a body corporate dealt with by the report. Admittedly, the point is a fine one and perhaps of only limited importance, but it is best avoided if it can be. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 149:
Page 102, line 9, at end insert—
("9A. In section 365(1) (winding up rules) for the words "this Act", in both places where they occur, there shall be substituted the words "the Companies Acts 1948 to 1981".").
The noble Lord said: This amendment is a minor drafting amendment and is consequential upon the provisions of Amendment No. 121, which I think we discussed at an earlier stage. Amendment No. 121 provides for the treatment of liabilities which arise in the winding-up of a company in respect of redeemable shares or shares which are subject to contract to purchase own shares of a company. The amendment allows the winding up rules which are made under Section 365(1) of the 1948 Act to reflect the provisions of subsequent Companies Acts, including this Bill when it has become an Act. It is a minor drafting amendment. I beg to move.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 150:
Page 103, line 10, at end insert—
("15A. In Schedule 1, in regulation 3 of Table A for the words "section 58 of the Act, any preference shares" there shall be substituted the words "Part III of the Companies Act 1981, any shares".").
The noble Lord said: This amendment is consequential upon Clause 41A in Part III of the Bill, which deals with the power of a company to issue redeemable shares. The amendment provides that Table A of the Companies Act 1948—which sets out a model form of articles for companies which have a share capital—will reflect the power given to companies to issue redeemable shares which need not necessarily carry preferential rights. This is a minor new departure. I beg to move.
On Question, amendment agreed to.
[Amendment No. 152 not moved.]
Lord Lyell Lord Lyell moved Amendment No. 151:
Page 103, line 47, at end insert—
("22A. In section 44(2) of the 1967 Act (requirements of 1967 Act relating to registration to be satisfied in case of unlimited company re-registering as limited) for the words "this Act", in both places where they occur, there shall be substituted the words "the Companies Acts 1948 to 1981".").
The noble Lord said: This is a small technical amendment which seeks to correct a faulty provision of the 1980 Act and ensures that the provisions of the 1980 Act relating to unlimited companies which re-register as limited companies are properly applied. I beg to move.
On Question, amendment agreed to.
6.25 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 153:
Page 104, line 39, at end insert—
(". In subsection (11) of section 17 (pre-emption rights)—

(a) in the definition of "relevant employee shares", after the word "held" there shall be inserted the words "or have been acquired"; and

(b) in the definition of "relevant shares", for the words "held, or to be held" there shall be substituted the words "held or acquired, or to be held or acquired".").

The noble Lord said: The purpose of this amendment is to make it clear that the issue of shares under the employee share option scheme is outside the ambit not only of the requirement of the shareholders' authority under Section 14 of the 1980 Act, but also of the pre-emption provisions contained in Section 17 and Section 18 of that Act.
I must admit at once that this is a highly technical matter and I hope that your Lordships will bear with me in setting it out. The precise difficulty arises because, under Section 17(11) of that Act, the exclusion of employees' shares, where an employee share scheme is involved, is drafted in terms that the shares concerned must be held under such a scheme. The operative word with which I am dealing is the word "held".
Under an option scheme the employee obtains an option, but once he exercises the option the shares that he then receives are held by him as normal shares, free and clear of any connection with the scheme. It may be that even the Government at this stage may think that this is a lawyer's technicality, but it raises certain real difficulties in practice. Supporting this amendment
1020
I have the views of many experienced practitioners in company law, and they are virtually unanimous in saying that in this respect the drafting of the 1980 Act is defective on this very point.
The new paragraph contained in the amendment which I now move gives clear and unambiguous effect to the purpose of the 1980 Act, and that is the sole purpose of the amendment. I beg to move.
Lord Trefgarne: This amendment has been the subject of correspondence between my department and various people including the noble Lord's honourable friend, the honourable Member for Dearne Valley. While believing that the grounds for doubt over the application to share option schemes of the exemption for employee share schemes in Section 17 of the 1980 Act have been exaggerated, the Government are willing to accept that amendments to remove any doubt should be included in the Bill. However, we do not believe that the amendments proposed by the noble Lord would be completely effective for their intended purpose. The proposed references to acquisition of shares under an employee share scheme may not include shares allotted in pursuance of a share option scheme if the basic premise of the doubters is accepted.
If the noble Lord will withdraw his amendment, the Government will undertake to bring forward an amendment better suited to achieving his objective.
Lord Lloyd of Kilgerran: I am very much obliged to the noble Lord for the reply that he has given, and, in the circumstances and in view of his undertaking, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 154:
Page 105, line 4, at end insert—
("In section 35 (acquisition of own shares by companies)—

(a) in subsection (1) for the words "Except as provided by subsection (2) below" there shall be substituted the words "Subject to the following provisions of this section";

(b) in subsection (2) the words from "and any company" to the end shall cease to have effect;

(c) in subsection (4)—

(i) for the words from the beginning to "purchasing" in paragraph (b) there shall be substituted the words "Subsection (1) above shall not apply in relation to—
(a) the redemption or purchase of any shares in accordance with Part III of the Companies Act 1981;
(aa) the acquisition of any shares in a reduction of capital duly made;
(b) the purchase of any"; and
(ii) for the words "by forfeiting shares or accepting a surrender" there shall be substituted the words "the forfeiture of any shares or the acceptance of any shares surrendered".
In section 37(1)(b) (treatment of shares acquired by company) after the words "acquired by the company" there shall be inserted the words ", otherwise than by any of the methods mentioned in section 35(4) above,".").
The noble and learned Lord said: This amendment updates references to own shares purchased by companies or held by them in Part II of the Companies Act 1980. This amendment is, therefore, minor and

1021
consequential to the clauses on the purchase of own shares. I beg to move.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 155:
Page 105, line 23, leave out ("In section 45(4)") and insert—
("In section 45—

(a) in subsection (2) (meaning of "distribution") for paragraph (b) there shall be substituted the following paragraph—

"(b) the application of capital (including the proceeds of any fresh issue of shares) in the redemption or purchase of any of the company's own shares;"; and

(b) in subsection (4).").
The noble and learned Lord said: This is also a minor amendment, consequential on the previous amendments dealing with the purchase of own shares. I beg to move.
On Question, amendment agreed to.
The Deputy Chairman of Committees (Lord Ampthill): I have to point out that, if Amendment No. 156 is agreed to, I cannot call Amendment No. 157.
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede had given notice of his intention to move Amendment No. 156:
Page 106, leave out line 31, and insert ("or a contract of service between a director of the company and its subsidiary").
The noble Lord said: Essentially, Amendment No. 156 covers the same point as Amendment No. 157. It is essentially a drafting amendment to clarify this particular paragraph. As the Government will inevitably prefer their own wording to my wording, I think that probably the simplest thing is for me not to move Amendment No. 156.
Lord Lyell Lord Lyell moved Amendment No. 157:
Page 106, line 31, leave out ("of its subsidiary".") and insert ("or between a director of a company and any of that company's subsidiaries".").
The noble Lord said: In the spirit of reciprocity of the noble Lord, Lord Ponsonby, I beg to move Amendment No. 157. We are very grateful to the noble Lord for his kind words. I understand that Amendment No. 157 should meet the points which were raised by the noble Lord, Lord Ponsonby. It is our belief that there are two improvements in the Government amendment. First, the Government amendment covers a holding company which might have more than one subsidiary, and we understand that that is a point which needs to be clarified. Secondly, especially for the benefit of my noble friend Lord Boyd-Carpenter who, alas! is not in his place tonight, the Government amendment has a full stop at the end, which would be very much according to the wishes of my noble friend Lord Boyd-Carpenter. With due thanks for the words of acceptance of the noble Lord, Lord Ponsonby, I beg to move.
On Question, amendment agreed to.
Schedule 3, as amended, agreed to.
Schedule 4 [Repeals]:
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede moved Amendment No. 158:
Page 108, leave out lines 4 and 5.
The noble Lord said: This amendment is consequential upon the passing of Amendment No. 62. Last Thursday evening we passed the amendment concerning the Registry of Business Names, and there were a number of amendments which were consequential to that amendment, and this amendment deletes the reference to the relevant sections of the 1916 Act from the Bill, and therefore reinstates those sections in law. I beg to move.
Lord Trefgarne: I had an awful feeling that the noble Lord was not going to move his amendment. This may be an appropriate moment to state the Government's position in response to the Division last Thursday on Amendment No. 62, moved by the noble Lord, Lord Lloyd of Kilgerran. In moving and speaking to that amendment, noble Lords made it clear that they were concerned not so much with the detail of that amendment as with the issue of principle of the retention of the Registry of Business Names. The amendment was of course agreed to, and, in the light of that decision, the Government would not think it right, or in accordance with our normal conventions, to divide the Committee again on the same point during this stage of our proceedings. Accordingly, the Government will not seek to divide on Amendment No. 158.
May I make it absolutely clear, however, that the Government remain firmly committed to the abolition of the registry. We have suffered a tactical reverse—if I can put it that way—not a defeat. Let there be no misapprehension; we shall be returning to this question at a later stage in the Bill's progress.
Lord Ponsonby of Shulbrede: It does not surprise me to hear from the noble Lord that it is the intention of the Government to return to this matter on Report stage. I hope, however, in view of the wide support for the principle of this series of amendments that the Government will seriously think how best to tackle this problem. The Government will no doubt be very much aware of the wide range of organisations which have reacted adversely to the Government's proposals to abolish the registry. In returning to this again at Report stage, I hope that the Government will take this very much to heart.
Lord Lloyd of Kilgerran: May I briefly support what the noble Lord, Lord Ponsonby, has said. There has been, and still is, wide support throughout industry about the maintenance of the business names registry. My telephone has been ringing constantly from firms and professional people saying that they are so pleased that this amendment that I put forward was accepted by your Lordships. I should have thought that the Government would wish to be flexible in their attitude towards industry, having regard to the great support that has been put forward in regard to the business names registry.
I noted from what the noble Lord the Minister said that he is going to take this matter up again at, I presume, Report stage. I think that was made clear in Saturday's Times when a considerable part of a

1023
column was included to indicate that your Lordships will hear more of the Government's view on this matter, and that they very much hope to reverse the decision of your Lordships on the amendment which I tabled. If the Government are proposing to put forward amendments which will deal with this situation and they are to be considered at Report stage, I hope that they will table these amendments as soon as possible. It is quite unfair, certainly for persons like myself who have not got the wealth of talent behind them to advise on these matters, that amendments on important matters like this should come up at the last minute. This is a plea from the heart for the early tabling of any amendment the Government put down in regard to this matter.
Lord Trefgarne: I ought to make it clear that while tabling of corrective amendments, if I can call them that, at Report stage is a possibility that we are examining, it is not necessarily the one that we shall follow because the Bill has yet to go through the other place. It may be that we shall prefer to correct the position, or seek to correct the position, in the other place rather than at the Report stage in your Lordships' House. I do not think in this context that we can be subject to the strictures that we have been subjected to in respect of the other matters on which we have tabled amendments. The proposals to abolish the RBN were indeed contained in the Bill when it was first presented to your Lordships.
Lord Lloyd of Kilgerran: I am grateful for the helpful announcement which the noble Lord has just made. I would support any procedure by which the Government would endeavour to raise this matter again in the other place rather than in this House.
Lord Ponsonby of Shulbrede: I entirely accept the last point that the noble Lord, Lord Trefgarne, made; that this is quite a different situation from all the other new amendments which the Government have been tabling during the course of this Bill. The concern of your Lordships' House was that a Bill presented to your Lordships' House at Second Reading, one would have thought, reflected the Government's opinion in a fairly advanced stage of what should be in the Bill. No sooner have we had Second Reading than we have 16 pages of amendments being tabled to the Bill. Subsequently we learn this afternoon that other vast new amendments are to be tabled to the Bill. The Government should have crystallised their views on this situation before the Bill came to Second Reading in your Lordships' House. With regard to these amendments, this is quite a different situation because the Government are reacting to a view of your Lordships' Committee which, maybe, they could not have anticipated in advance.
Lord Trefgarne: I doubt that this is the moment to pursue this interesting dialogue. Let me simply rest on saying that I do not agree with everything that the noble Lord has said. Perhaps the noble Lord may now see fit to withdraw this amendment.
Lord Ponsonby of Shulbrede: No.
On Question, amendment agreed to.
The Deputy Chairman of Committees: Before calling Amendment No. 159, I should point out to the Committee that if it is agreed to I cannot call Amendment No. 160.
6.38 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 159:
Page 108, line 9, leave out ("sections 17, 18 and 19").
The noble Lord said: We have now approached Schedule 4 which contains a list of the sections of previous Acts which are to be repealed. At page 108, line 9 it is proposed to repeal Sections 17, 18 and 19 of the Companies Act 1948. Section 17 of the Companies Act 1948 I have found, in my experience at the patent bar, a useful section. It is a section which is concerned with the prohibition of registration by companies of names which are undesirable. Section 18 is a helpful section dealing with the changes of names of companies and also if, from inadvertence or otherwise, there has been a first registration which is wrong there is a simple procedure whereby such mistakes can be rectified. Section 19 deals with the position where the use of the word "limited" after the name of an organisation or a company can be left out. That has been very useful for charitable and other companies which conform with the procedures.
I must inform the Committee—and here I am echoing the words of the noble Lord, Lord Boyd-Carpenter—that I find myself in difficulty to know where I am in relation to amendments which have or have not been accepted by the Government and such amendments as they are proposing to reconsider, and therefore having over the weekend read through the Official Report of our proceedings in Committee, I am not clear whether there will be in the Bill something equivalent to Sections 17, 18 and 19. As I have found those three sections of the Companies Act 1948 of considerable importance in my activities, I am taking the precaution of moving this amendment so as to delete from Schedule 4 the references to those sections.
Lord Trefgarne: The Government's proposals for the reform of the legislative requirements governing company names, whether as an initial registration or a subsequent change, which are contained in Clauses 22, 23 and 24 of the Bill, recognise the real difficulties which have been experienced since 1947 in seeking to apply, on an equitable basis, the wide discretionary powers contained in Section 17 of the 1948 Act. With over 800,000 names now on the register, to which over 60,000 are being added each year, it would be impossible frankly to ensure, for example, that there was no possible confusion between names, even if more staff could be provided. On the other hand, it is important to put this issue into perspective. As I said, the annual rate of registration exceeds 60,000, as has been the case for some years. Nevertheless, the number of objections received by the registrar in the last year was only just over 300, despite some necessary relaxation in the last 18 months of the criteria within the present wide discretion against which new names are compared with those already registered. It is against that background that one should assess the arguments—on the one hand, that the translation of the present discretion will create a "rogues charter" and, on the

1025
other, that the present cumbersome and time-consuming system should be simplified.
The provisions of Section 18 of the 1948 Act, under which companies are permitted to change their names voluntarily or may be directed to do so in certain circumstances, are reflected in Clause 24 of the Bill, although the powers of the Secretary of State to direct a change of name are related, of necessity, to the criterion set out in Clause 22 by reference to which a name may be allowed. To do otherwise would mean, in effect, changing the rules half way through the game, which clearly would not be equitable.
Section 19 of the 1948 Act allows companies which meet certain strict criteria to be licensed to omit the word "limited" from their names, for example, charities which constitute the majority of the companies which have taken advantage of this provision. Although the Government virtually suggested that this privilege should be withdrawn—as being no longer as relevant in a situation where, under the European Communities Act 1972, all limited companies are required to reveal that status on their notepaper—they have taken account of representations received. Clause 25 of the Bill now provides for this privilege to be retained by companies which meet the criteria set out therein, thus retaining the effect of the existing Section 19, but without a requirement for specific licensing. I hope that, in the light of that explanation, the noble Lord will not press the amendment.
Lord Lloyd of Kilgerran: I am obliged to the Minister for that answer, particularly his comments about the position on Section 19 of the Companies Act 1948. I confess that I could not understand his comments about Sections 17 and 18. He introduced some figures and spoke about administrative inconvenience arising from the operation of the Companies Registry. The procedure could readily be simplified without increasing the staff greatly. It could be done by normal administrative arrangements; for instance, to reduce the number of names on the register, registration could be for, say, five years, unless people ask for renewal, and I am of course talking now about the Register of Business Names. Simple administrative factors could be introduced to make the register more workable and manageable. I will consider what the Minister said, and on the understanding that I may return to the subject at a later stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 160 not moved.]
Lord Lyell Lord Lyell moved Amendment No. 161:
Page 108, line 9, column 3, at end insert—

("In section 56(2) the words from "of any" to "or".

Section 58.

In section 62(1)(e) the word "preference".").

The noble Lord said: This is a minor technical amendment to Schedule 4 and is consequential to Amendment No. 110 which we discussed earlier and which deals with the power of a company to issue redeemable shares. No. 161 provides for the repeal of Section 58 of the Companies Act 1948. That section provides for the issue of redeemable preference shares. The amendment also amends Sections 56
1026
and 62 of the 1948 Act. Those two sections deal respectively with the application of premiums received on the issue of shares and with the delivery of specified documents to the Registrar of Companies.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 162:
Page 108, line 17, column 3, at end insert—

("Section 188(5).").

The noble Lord said: This amendment corrects a small technical error. Clause 48(3) repeals Section 188(5) of the Companies Act 1948. That section should be included in Schedule 4, and for that reason I beg to move.
On Question, amendment agreed to.
Lord Trefgarne Lord Trefgarne moved Amendment No. 163:
Page 108, line 36, leave out ("the") and insert ("that").
The noble Lord said: The words for repeal in Section 16 of the Companies Act 1948 which are quoted in Schedule 4 contain a misprint. The phrase "activities in the year" should read "activities in that year", and this amendment corrects that error.
On Question, amendment agreed to.
Lord Trefgarne Lord Trefgarne moved Amendment No. 163A:
Page 108, leave out line 42.
The noble Lord said: This is a minor technical drafting amendment. The repeal of Schedules 1 and 2 of the 1967 Act which amend, and restate in its amended form, Schedule 8 to the 1948 Act, gives the impression that Schedule 8 is to stand in its unamended form. That is not so. Schedule 8 as amended and renumbered Schedule 8A will be required for the interim period before the new accounting régime comes into force and for banks and insurance companies. The amendment makes that clear.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 164:
Page 108, line 42, at end insert—

("1972 c. 68.

European Communities Act 1972.

In section 9(3)(dh) the word "preference".").

The noble Lord said: This technical amendment to Schedule 4 is consequential on the power provided in Amendment No. 110, which provides powers for a company to issue redeemable shares. We seek to allow companies to issue redeemable shares which need not carry preferential rights. The amendment provides that a reference in the European Communities Act 1972 to redeemable preference shares is altered, so that it becomes a reference merely to redeemable shares. I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 165 to 169 not moved.]
Lord Lyell Lord Lyell moved Amendment No. 170:
Page 109, line 2, column 3, at beginning insert—

("In section 40(2)(b) and (3) the word "fund".

Section 41(11).

In section 43(2)(a) the words "or filed".

In section 45(3) the word "fund".").

The noble Lord said: This amendment is in substitution for Amendments Nos. 165 to 169, which I think your Lordships will find represented by rows of merry stars in today's Marshalled List of Amendments. It is a minor and technical drafting amendment, and it is consequential to Amendments Nos. 3, 4, 21, 22, 43 and 44, which have already been spoken to and agreed.
On Question, amendment agreed to.
Lord Trefgarne Lord Trefgarne moved Amendment No. 171:
Page 109, line 19, at end insert—
("(e) The repeal by this Act of section 41(11) of the 1980 Act shall have effect subject to the saving in paragraph 6(1A) of Schedule 2 to this Act.
(f) The partial repeal by this Act of section 43(2)(a) of the 1980 Act shall have effect subject to the saving in paragraph 6(3) of Schedule 2 to this Act.").
The noble Lord said: This is a very minor and technical drafting amendment, consequential to Amendments Nos. 21 and 22, which your Lordships' Committee has already agreed. I beg to move.
On Question, amendment agreed to.
Schedule 4, as amended, agreed to.
House resumed: Bill reported with the amendments.

Prevention of Terrorism (Temporary Provisions) Act 1976 (Continuance) Order 1981
6.52 p.m.
Lord Belstead Lord Belstead rose to move, That the draft order laid before the House on 24th February be approved.
The noble Lord said: My Lords, I beg to move that the draft Prevention of Terrorism (Temporary Provisions) Act 1976 (Continuance) Order 1981 be approved. The purpose of the order is to continue in operation for a further period of 12 months the Prevention of Terrorism (Temporary Provisions) Act 1976. The Act is due to lapse tomorrow, unless renewed. The order was approved in another place on 18th March.
The continuance of the provisions over the next 12 months remains a necessity, however regrettable. It is right that Parliament should require the Government to justify that view and that Parliament itself should debate the issues and reach its own decision on the renewal of the Act. I shall try to describe to your Lordships the extent to which the Act has been used, and I shall follow that, very briefly, with some more general points concerning the need for the powers.
One of the major powers which Parliament by the Act has vested in my right honourable friend is that of making exclusion orders. The power may be exercised only where by right honourable friend the Home Secretary is satisfied that someone is, or has been, concerned in the commission, preparation, or instigation of acts of terrorism in connection with the affairs of Northern Ireland, or may attempt to enter Great Britain for that purpose. Therefore these cases have to be very carefully considered. In total, 269 exclusion orders have now been made, 49 of them since I last reported on these matters to your Lordships.
Exclusion under the Act is an executive, non-judicial procedure. Those of your Lordships who have taken an interest in these matters since the emergency powers were originally introduced will be aware of that fact. But the Act provides a safeguard for an excluded person by entitling him, or indeed her, to make representations to an independent adviser. His right—if I may speak as though the matter relates to men all the time I think that that would be for the convenience of the House—to do so is explained when he is served with an exclusion order. He is also informed that, if he wishes it and has not agreed to be removed from Great Britain, he is entitled to a personal interview with the adviser. On the basis of the interview and the examination of any representations and all the relevant papers, the adviser will produce a report for my right honourable friend, who will reconsider the case on the basis of the adviser's recommendation. In total, 43 people—eight in the past year—have made representations against exclusion, and 14 orders—two in the past year—have been revoked following consideration of the cases by my right honourable friend, or his predecessors.
My right honourable friend has made clear in another place how grateful he is to his advisers for the work that they have done, and I should like to add my thanks to the noble Lords, Lord Underhill and Lord Alport, for the care and judgment with which they carry out this delicate task. I should also like to thank Mr. John Newey, QC, who has recently stood down as an adviser following his appointment as a circuit judge. I am pleased to tell your Lordships' House that Mr. Hugh Carlisle, QC, has accepted my right honourable friend's invitation to become an adviser on these cases.
Following a recommendation by the noble Lord, Lord Shackleton, in his valuable report on the operation of the Act, in 1979 a system was established for reviewing exclusion orders. In essence, any excluded person who wishes to have his case reviewed may do so three years after the exclusion order is made. A letter is sent to the last known address of the excluded person, to inform him of this right. So far this year 105 people have become eligible to have their orders reviewed; of that total 27 have requested review. Twenty-two reviews have been completed, and three orders revoked and 19 confirmed as a result. The remainder are still under review.
I am sure that your Lordships are aware that under the Act the police may detain people, either inland or at the ports, if they suspect them of being concerned in terrorism. On their own authority the police can hold such people for up to 48 hours. In order to pursue their inquiries further the police must apply for an extention of detention of up to five days. From the time that the legislation came into force in 1974 until 28th February this year the police have detained a total of 5,101 people under its powers—3,666 of them at ports and 1,435 inland. The equivalent figures for the past year are 419 people detained at ports and 96 detained inland. In 669 cases—120 of them in the past year—an extension of detention has been granted. It might help to put the figures relating to ports, at least, in perspective if I point out that more than 80 million people passed through ports in Great Britain last year.
In the Government's view the powers are still necessary and should be renewed for the coming 12 months. It is clear that the terrorist threat posed by both the IRA and the so-called Loyalists has not diminished and that it extends to Great Britain as well as Northern Ireland. Your Lordships will recall the placing of bombs outside the Territorial Army Centre in Hammersmith on 2nd December 1980, as well as the bomb explosions at gasholders at Bromley-by-Bow on 31st December, and the placing of an incendiary device, surrounded by flagons of petrol, in barracks at RAF Uxbridge on 8th January. The Provisional IRA admitted responsibility for all those incidents. Although none of them resulted in serious injury, they could have proved deadly. But for some very quick thinking, the device at Uxbridge, in particular, could have killed a large number of people.
We all owe an enormous debt of gratitude in these matters to the police, whose patient and skilled work has contributed so much to the reduction of terrorism in recent years. This is a preventive role, which does not lend itself to spectacular successes. The work requires watchfulness and care, and the painstaking addition of detail to detail until eventually a picture is built up. Used with discretion and skill, the powers provided in this Act play their part in preventing acts of terrorism. I accept that the powers in this Act infringe civil liberties—and that is a very serious thing to say—and can inconvenience members of the travelling public. I deeply regret this. But while terrorist groups remain dedicated to continuing their vicious campaigns of violence both in Northern Ireland and on the mainland, my right honourable friend believes that it would be wholly wrong to deny the police such assistance as the Act provides in fulfilling their duty to protect the public at large.
The port and internal controls act as a deterrent to would-be terrorists. The provisions proscribing organisations and prohibiting displays of support for them prevent the IRA and the Irish National Liberation Army—groups whose tools of persuasion are the bomb and the gun—from operating with even a veneer of legality. The power of exclusion, which has always been applied with great discretion and care by my right honourable friend and by his predecessors, has reduced substantially the number of those concerned in terrorism in connection with Northern Ireland who can legally come into Great Britain.
For these reasons I ask your Lordships' House to support the Government's view that the continuance of this Act is necessary. I believe that the public would rightly condemn us if we allowed the Act to lapse before it was safe to do so. I therefore move that this Act be renewed for a further 12 months.
Moved, That the draft order laid before the House on 24th February be approved.—(Lord Belstead.)
7.2 p.m.
Lord Boston of Faversham: My Lords, once again we are embarking on a course which I have no doubt we all regard as repugnant—the consideration of an order to renew for another year the powers in the Prevention of Terrorism (Temporary Provisions) Act. I have no doubt at all—and, indeed, it is perfectly clear from what he has said—that the Minister, the
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noble Lord, Lord Belstead, views this task with as much distaste as do the rest of us; and I should like to thank him for the thorough way in which he has reviewed the operations of the Act over the past year and reported to your Lordships about it.
The task is unpleasant for two main reasons: first, because the powers in this Act curtail severely, as the Minister himself has indicated, the civil liberties which we in this country cherish so deeply; and, secondly and perhaps even more importantly, because of the grotesque actions of those involved in terrorism which made us take these powers in the first place. The powers have been in force now for nearly six and a half years, since 29th November 1974, when the original Act came into effect; and it is a source of regret that we are still having to extend these temporary measures. As your Lordships will know, an order like this one was approved in another place last Wednesday, and on the same occasion an Opposition call was made for a new inquiry into the workings of the Act, while at the same time the Opposition Front Bench there did not seek to oppose the order itself. There were, I believe, significant merits in the arguments put forward by my right honourable and honourable friend for a new inquiry, the most important of which is perhaps that if we are to continue for the time being with powers which make great inroads into the civil liberties we have so painstakingly built up—and indeed, at times, painfully had to preserve in this country—we must feel completely justified in doing so by the exceptional nature of the circumstances and, in this case, the real and present threat from terrorism.
In December 1977, as your Lordships will recall, my right honourable friend the then Home Secretary, Mr. Merlyn Rees, set up the inquiry into the Act carried out so thoroughly by my noble friend Lord Shackleton, who reported in August 1978. That inquiry was initiated almost exactly three years after the original Act came into force. Another 3½ years, nearly, have gone by now, so on the basis of timing it could not be argued that the moment for a new inquiry had not arrived. Quite apart from the excellence and value of the report my noble friend produced—and it led to many improvements following the acceptance of almost all my noble friend's recommendations—I believe that the very fact that those operating the Act were brought under that close scrutiny (in which, I might say, they co-operated magnificently) was itself beneficial and made it all the more possible for us to satisfy ourselves that the powers were being properly exercised and were in all the circumstances justified. However, the call for a fresh inquiry was rejected, as we know, in another place last week, and I will accordingly not press for one again here, though I do believe your Lordships might wish to note the point made by the Minister's right honourable friend the Home Secretary, that if he feels justified in doing so he will come forward with his own proposals for an inquiry later.
Let me also make it perfectly plain now that so far as the order itself is concerned the Minister has my full support in asking the House to approve it. But let me add this, too. It is now two years—it was on 22nd March 1979—since the noble Lord, Lord Wigoder, suggested that the next time the Act came up for renewal the Government should consider reintroducing

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it as a Bill, so that its provisions might be subjected to detailed examination and, if appropriate, amended—for, of course, we cannot amend an order. Then, last year, on 17th March, I, too, raised his suggestion, and he did so again himself as well. In reply, the noble Lord, Lord Belstead, said (at col. 76) that the suggestion would
"certainly be very carefully considered before the legislation comes before Parliament again in a year's time".
Accordingly—and this is the first question I should like to put to the Minister tonight—I would ask him what consideration has been given since then by the Government. I would add this point. In the absence of a fresh inquiry into the working of the Act, the proposal for the Act to be brought forward as a Bill next time, if it is indeed still—
Lord Elwyn-Jones: The working of the order, not the Act.
Lord Boston of Faversham: No, my Lords. The point I was seeking to make was this. In the absence of a fresh inquiry into the working of the Act—that was the proposal which was called for in another place last Wednesday, an inquiry into the working of the Act—the proposal for the Act to be brought forward as a Bill next time, if indeed it is still needed in a year's time, is I believe even more apposite, so I would also ask the Minister whether he would assure us that this suggestion will now be given further and most serious consideration.
As to the order itself continuing the Act in force for another year, I am myself in no doubt whatsoever that that should be done. Mercifully, as the statistics which the Minister has mentioned to your Lordships tonight show, rather less use (I think it is fair to say) of its powers have been necessary over the past year. The use of detention is well down, though exclusion orders are about the same as in the two previous years, and in fact more than double the numbers for 1977 and 1976. But there have been further acts of terrorism over the past year, as the Minister himself has indicated; and there was, in particular, the near tragedy at Royal Air Force, Uxbridge, to which he has referred. I should like to commend the heroic action taken, which led to the undoubted saving there of many lives.
There is also the point that the whole purpose of the Act is to prevent terrorism and there is the associated point that it has a deterrent effect. This is a point which I have always regarded as wholly valid and I have no doubt that those who have ever had any responsibility for anti-terrorist activities, and therefore access to relevant information, have evidence and reason to support that view; it was a view also accepted by my noble friend Lord Shackleton in his report. By its nature, it is never possible to evaluate precisely the extent of that deterrent effect but that it exists I am in no doubt at all. I believe that we must continue to arm our forces of law and order with the powers needed to enable them to protect our most fundamental of freedoms and civil liberties, the right to life.
I have only three other comparatively minor questions to put to the Minister. Two of them concern the review of the exclusion orders to which he referred
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in his speech. We, the last Administration, accepted Lord Shackleton's recommendation that there should be a review of exclusion orders. We decided that each order should be reviewed after it had been in force for three years, and the noble Lord, Lord Belstead, announced his Government's acceptance of that commitment, too. I wonder whether the back-log which existed when these reviews were first started has now been cleared; because when the reviews were instituted, the Act already had been in force for five years. Also, can the noble Lord give us any indication of how long, approximately, a review tends to take? I appreciate that circumstances are different and, therefore, the times will be different; but if he can give any sort of indication that would be helpful.
The other point concerns Section 11 of the Act which, as we know, creates an offence for withholding information about terrorist activities. I believe that it is worth noting that that provision, which is understandably one of the Act's most controversial provisions has been of value over the past year, with the prosecutions and convictions that have taken place; and, no doubt, that section, too, has its own particular deterrent effect. I wonder whether there are any trials still pending arising out of changes under Section 11.
I have referred to one act of heroism. Not all are so dramatic as that one. Many go unnoticed publicly and others, mercifully, are made unnecessary because of the dangers that our security forces, the bomb disposal squads, the police and the other essential services, place themselves in as a matter of routine, in rooting out terrorists and in preventing terrorism. I hope that our thanks can be passed on to all of them. We all, and, perhaps, they above all, look forward to the day when these powers can be cast aside. That time, I believe, has not yet come. I join in support of this order.
7.14 p.m.
Lord Wigoder: My Lords, this being the fifth occasion on which your Lordships have debated an order in similar terms to this, I do not pretend that I can find anything new or significant to say. The threat which the IRA, in particular, poses is one which needs no underlining from me and is one which is recognised by all of us. It is not only a threat to life and limb but to the very foundations of our society. It is a threat carried out, as is perhaps not always recognised, by a gang of people in very close touch with other gangs of people similarly motivated throughout the world. I might remind your Lordships of the words of Lord Chalfont recently when he commented that the IRA have nothing politically in common with the Baader-Meinhof group or the PLO; nevertheless, they share everything that makes their operations successful. They exchange weapons, they engage in joint operational planning; they use each other's training areas and provide each other with administrative and logistic support. I believe that the evidence for that is overwhelming and it is odd that the present Government should find no inconsistency in opposing the IRA with such vigour and yet espousing the cause of the PLO with equal vigour. But that is perhaps another story.
That this legislation has proved useful is beyond

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doubt. I am not sure that the prescription section of the Act has had more than a cosmetic attraction, but I have no doubt on the evidence that the exclusion powers, the powers to make exclusion orders, have proved their worth. There is, I think, a safeguard in the assistance given by the advisors. I join in the gratitude expressed by the noble Lord, Lord Belstead to the noble Lords, Lord Underhill and Lord Alport for their service in that regard. The powers of detention beyond question, I think, have proved their worth. I have been involved in cases myself, in which there is no doubt that it was only because people were able to be detained for as long as seven days, that the police were enabled to bring very dangerous men to justice.
I have a little doubt and always have had, about Section 11 of the Act, which makes it an offence to fail to give information about acts of terrorism. That seems to have been always a trifle unrealistic. There has been one case in the history of the Act in which that section has been used; it did not result in any prison sentence being imposed and I cannot believe that it has served any useful purpose. But that the Act, as a whole, has played its part, I am in no doubt. I know that, under these powers, innocent people may suffer. I accept that. I think the objective must be to see that the fewest number of people suffer unnecessarily and suffer the very minimum of inconvenience. In the last resort, I think I would sooner be an innocent person wrongly detained in a police station overnight than an innocent person blown to hits by some mindless criminal. It is true also that this Act inevitably impinges upon civil liberties. On reflection, most laws do so. It is because of that simple fact that bodies like the National Council for Civil Liberties understandably find it difficult to be enthusiastic about any piece of legislation which is ever brought to the statute book. But there is this element and it is an element which must be considered with care when we are reviewing this Act.
There has been a proposal, which was debated in the other place at length, that some further review in line with that carried out by the noble Lord, Lord Shackleton, should now be started. I must confess that I found in the course of that debate very little evidence to justify a new inquiry of that sort so soon after the previous one had been completed. But, in principle, it is desirable that this Act should be constantly under review and I am grateful to the noble Lord, Lord Boston of Faversham, for supporting the suggestion that has been put forward by me and by others that perhaps the most helpful way in which a thorough review of this Act could take place at some time in the near future is that, while this Act still remains on the statute book, there should be introduced a Bill to take its place which could be subject to proper parliamentary scrutiny in all stages in both Houses of Parliament. I hope that that suggestion might commend itself to the Government as a constructive way to ensure that this legislation serves its purpose and does so with the very minimum intrusion into our civil liberties.
7.20 p.m.
Lord Harris of Greenwich: My Lords, I should like to speak fairly briefly to this order. Members of the House may recall that I was in fact the Minister who introduced the first of the Prevention of Terrorism
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Bills in 1974 after the Birmingham public house bombing and then the Bill in 1976, when we were enabled to take the matter at a more leisurely pace than was possible in the emergency situation which confronted us at the end of 1974. As has been made clear in the speeches that we have heard this evening, there are two clearly defined issues before the House. The first is, should there be some form of further inquiry into the Act? This was proposed in the House of Commons by Mr. Hattersley and repeated today by the noble Lord, Lord Boston of Faversham.
Lord Boston of Faversham: My Lords, I am so sorry to interrupt the noble Lord, Lord Harris of Greenwich. I was not tonight—and I am sorry if I did not make it clear—proposing an inquiry along those lines. I was noting the fact that the point had been made in another place last week, but, because it had been rejected, I was not putting it forward again today.
Lord Harris of Greenwich: My Lords, I am much obliged. The noble Lord touched on the matter that had been deployed at rather greater length by his right honourable friend in another place. Let us at least agree on that.
The second question is of course the more fundamental one. Should the powers be extended at all? I shall first deal with the inquiry point. It was, as the House will recall, announced by the then Home Secretary, Mr. Rees, in December 1977 that the noble Lord, Lord Shackleton, had been asked to conduct this inquiry. I should like to remind the House of the precise terms of reference of that inquiry:
"Accepting the continuing need for legislation against terrorism, to assess the operation of the Prevention of Terrorism (Temporary Provisions) Acts 1974 and 1976 with particular regard to the effectiveness of this legislation and its effect on the liberties of the subject, and to report".
On page 80 of the report the noble Lord, Lord Shackleton, gave a substantial list.
I should be grateful if the Opposition Chief Whip would allow me to continue my speech because it is rather difficult to speak if one in fact is hearing a rather substantial amount of conversation just by one.
On Appendix D the point that is made in the Shackleton Report is this: that he consulted a very substantial number of different organisations: the Association for Legal Justice; the Association of Chief Police Officers; the Association of Liberal Lawyers; the British Institute of Human Rights; and a very large number of other organisations. He paid a very large number of visits to various police forces. He conducted a series of discussions with chief constables and with the special branches of a number of forces, both the Metropolitan Police and a number of forces outside London. He then wrote in conclusion this report (which is on Page 48 at paragraph 156):
"When the Home Secretary introduced the Prevention of Terrorism (Temporary Provisions) Bill in 1974, he remarked that the struggle to eradicate terrorism in this country might not be a short one. There is, he wrote, a delicate relationship between the resolution of an urgent problem by the introduction of new powers and the longer-term effects of such measures. It is not sufficient merely to enact powers of this kind. They need to be subject to continuing analysis. Equally it is salutary to remind oneself of the words of horror expressed at the time of the

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Birmingham bombs. It is all too easy to criticise the legislation and the police in times of comparative quiet".
That is precisely the position.
I do not see—quite bluntly—how it can be seriously argued that there is, only two years after the report of the noble Lord, Lord Shackleton, a case for yet another inquiry. What is the inquiry to be directed at? It surely can only cover precisely the same territory as was covered by the noble Lord, Lord Shackleton, only two years ago.
I have no doubt about the admirable motives of those who have put this proposal forward; but I do not, with respect, consider that it is sensible at a time when there is a continuing threat from the IRA and very, very heavy pressure on the special branches of the police forces, both in London and outside it, to have yet another inquiry going over precisely the same ground, which will take up an immense amount of time of both members of the police service and a very large number of other people as well.
I should like to make the further point that it is also increasingly difficult to get serious-minded people to agree to conduct such inquiries if they are simply going over precisely the same ground—I repeat—only two years later.
Lord Elwyn-Jones: My Lords, I wonder whether the noble Lord would forgive me for interrupting. He overheard my noble friend saying that no one in this House was suggesting that there should be such an inquiry. This eloquence is interesting but quite irrelevant.
Lord Harris of Greenwich: My Lords, I am grateful as always to the noble and learned Lord. But I am answering a speech which was put forward by the official Opposition in another place. They chose to divide the House of Commons on the issue. I am, in fact, pointing out why I believe that the recommendation made by the official Opposition and voted upon by them, as the noble and learned Lord may recall, was in fact in my view wholly undesirable.
I must repeat this. I think that it is a very great pity, in terms of dealing with terrorist legislation, when we start having party divisions in either House of Parliament. I think the risk of terrorist attacks is such that there is a common interest among people of all political persuasions to try to preserve national unity on this particular matter.
I turn now to the second question. Should the powers be extended at all? I should like to say to the House quite bluntly—and I do not think there has been any disagreement expressed on this issue today, though there was I think in another place—that if we do not extend this legislation we are taking the gravest risks with the safety of the public of this country. May I deal first with exclusion orders. Without any doubt whatever, a very substantial number of those who have been excluded since the passage of the legislation in 1974 would have undoubtedly been involved in acts of terrorism if they had not been excluded from this country. The Parliamentary Under-Secretary reminded us this evening that 269 orders have been made which in my view, given the
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extent of the problem, is in no sense an excessive number.
The second question is the power given to the police to detain on suspicion—and with the agreement of the Minister of the Crown—for a further five days people whom they suspect may become involved in acts of terrorism. I think the case for this was made by the noble Lord, Lord Wigoder, who has a substantial amount of professional experience so far as this is concerned. There is no doubt at all that a number of those who have been arrested and subsequently convicted would only have been convicted because of the possession of these powers.
There is no doubt, as the noble Lord, Lord Wigoder, pointed out in his speech, that this problem of terrorism is not in any sense a problem unique to this country. It affects virtually all the Members of the European Community with the exception of Greece, Luxembourg and Denmark.
If the Opposition Chief Whip would like to interrupt my speech, I shall gladly give way to her. I do find this constant conversation makes it extremely difficult to concentrate in making a speech to your Lordships.
Baroness Llewelyn-Davies of Hastoe: My Lords, I am so sorry that the noble Lord finds it difficult to concentrate. I am not interrupting him; I do not feel there is much need to because his speech is, if I may say so, not awfully relevant to what noble Lords in this House have said.
Lord Harris of Greenwich: My Lords, I am grateful to the noble Baroness. That is the type of courtesy which I have come to expect from her, I regret to say.
My Lords, I turn now, if I may, to the question of the balance that we have to strike on this matter of terrorism. It is undoubtedly an extremely difficult one. A problem which in fact, as I have pointed out, affects a very large number of countries outside our own and, as the noble Lord, Lord Wigoder, and the Parliamentary Under-Secretary said, there is no doubt that the powers which are contained in this legislation represent a significant encroachment on the civil liberties of the subject. In fact it is foolish for anyone who is in favour of this legislation to deny this proposition.
I repeat that without these powers, as the noble Lord, Lord Boston of Faversham, said in his speech, people would have been deprived of the most important civil liberty of all: the capacity to continue to live. I am afraid we have to recognise in the IRA a murderous enemy who is prepared to use the utmost violence in order to achieve its objectives and I think it would be quite extraordinarily reckless for Parliament, in the circumstances I have described, to deny the Government the powers for which they are asking this evening.
7.31 p.m.
Viscount Brookeborough: My Lords, after the erudite speeches which have preceded mine, I am very awestruck in taking up the cudgels in support of this order. I am going to ask for the extreme indulgence of this House if I do not stick absolutely directly to the subject of this order. The alternatives which we have from Northern Ireland are, very often, to try to put down a Motion and debate it or else to be slightly

1037
out of order when speaking on a Motion in front of this House. Therefore I ask your Lordships' indulgence if I have only a tenuous touch on one or two of the subjects I am going to raise about this particular order. No doubt your Lordships will tell me when I have gone too far.
I should like to thank my noble friend for his introduction of this order and, needless to say, I support it very strongly. To do otherwise, living as I do in the North of Ireland, would be utterly irresponsible, for, although this has been discussed tonight mostly in a "Great Britain" atmosphere, it is from the Northern Irish point of view that I see it. When not only the lives of others but possibly your own life as well are at stake, it greatly concentrates the mind. So, if I look at this from a Northern Ireland point of view I am sure that I shall have your Lordships' support, even at some stretch of your powers of imagination as regards keeping within order.
This Act is a terribly important Act on two counts. The first is that it will convince the terrorist that the whole of the United Kingdom is against him. Secondly, it convinces all the people of Northern Ireland—and I can only speak for them—of the Government's intention to destroy terrorism and wipe it out. That is almost the most important thing—this belief in the determination of the Government to win, so far as the population which is under attack is concerned.
My Lords, this is where I shall begin to ask for your indulgence. Those of you who have followed the rather tortuous announcements which have been made from Dublin and the silence which has come from this side of the water about the Prime Minister's discussions with the Prime Minister of the Irish Republic will realise the problems that can exist when you get an alliance as a result of a complete identity of view between the Reverend Paisley and Mr. Haughey. They both have an identity of view because they are both standing for election. The interest of the Prime Minister of the Irish Republic is to make the summit an important occasion when the totality of relations between London and Dublin is being raised and when the constitution of Northern Ireland is at stake. The Rev. Ian Paisley, the honourable Member for North Antrim, has an identical interest in presenting the threat to our constitution.
Both these particular threats raise the problem of terrorism on either side, and this Act is about the prevention of terrorism. It is for that reason I feel it is terribly important that we should continue this Act and realise the dangers that are involved by allowing something which can be interpreted by anybody in the way they like. Public opinion in Northern Ireland is rather like public opinion was in this country during the war. People listen to every news bulletin and they believe the worst always.
This has been a very major problem and it remains so. Only yesterday—and this is one of the reasons why I came winging over today to raise this tenuous subject—the Foreign Minister of the Irish Republic stated on one of the radio programmes that the new institutions under discussion would mean a united Ireland within five years. If the Foreign Minister was correct, then we should be discussing not this Act but an Act with far more violent terms in order to contain the violence that would surely erupt. But the Foreign
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Minister of the Irish Republic only a week or so ago said very different things and t should like the Government, if they can, to comment on this. I have just seen on the tapes that in fact the Northern Ireland Office have said something about it.
There are many things in this Act which I believe should be subject to summit talk: for instance, the noble Lord, Lord Wigoder, mentioned a subject very dear to Ulster hearts: the seven-day detention or the five-day extension of arrest for interrogation. I believe that, in the summitry which goes on and when this Act is reviewed and comes before this House again, it should be a joint treaty Act so as to make sure that the Gardai in the Irish Republic have the same powers that our police have here.
The question of the review of this Act has been very well dealt with, but I believe that any review should in fact be done as part of a joint operation between Dublin and London. We surely should be able to accept together the common threat which exists to our civilisation. The papers no longer report very many of the activities of the terrorists that go on in Northern Ireland. In the last six weeks we have had eight major efforts, and luckily they have all been failures. Only last week the police arrested six people, who were highly armed with very sophistacted weapons, six miles from my home. The exclusion order could not have done any good to them because they came across without the exclusion order, but the seven-day interrogation and detention has done the job and they are now charged; so, my Lords, I have great pleasure in supporting this order.
7.38 p.m.
Lord Belstead: My Lords, I am grateful to your Lordships who have taken part in this debate. In case anyone may think that your Lordships' House takes the annual renewal of this Act, which has such serious implications, on the nod, I think that the speeches which have been made this evening will show that that is in no way the case.
The noble Lord, Lord Boston, was good enough to make a point which he has made previously: namely, the enormous importance of this legislation so far as prevention is concerned. The noble Lord also expressed his thanks, as I know all the rest of your Lordships do, to those who are responsible for the operation of the Act. The noble Lord, Lord Wigoder, although he drew attention to certain areas of criticism and difficulty in the Act, expressed, as I understood him, his support for the need for continuation—again because continuation at the moment will lead to the best chances for prevention.
I accept the point made very strongly by the noble Lord, Lord Boston, that this Act contains powers which all of us who share a concern for civil liberties wish we could do without. I, no less than any other Members of your Lordships' House, look forward to the day when the Act can safely be allowed to lapse. But—and I cannot emphasise this too strongly—that day has not yet come. If the police are to continue to protect life and property from the threat posed by terrorism, they need our support and the powers which this Act gives them.
The noble Lord, Lord Boston, asked me whether any trials were still pending on charges brought under

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Section 11 of the Act. The answer to that question is, no, there are no trials pending on charges laid under that section. The noble Lord also asked me about the backlog of three-year review cases and whether this backlog has been cleared. The answer to that, on the other hand, is yes, the backlog of these cases has now been cleared.
However, when the noble Lord asks me how long a review of a case takes, the answer is not quite so easy. The time that these reviews take depends on a number of factors and it is difficult to give any single figure. Once an excluded person has signified his or her wish to have an order reviewed by filling in and returning a questionnaire, the views of the police are sought and an interview with the excluded person may be necessary before the case is considered by officials and submitted to my right honourable friend for a decision.
My noble friend Lord Brookeborough gave his support to the passage of this order. I can well understand why he feels so strongly about this, living as he does in an area where he sees the need to prevent terrorism by any method possible—terrorism which, of course, led only recently to the tragic deaths of Sir Norman Stronge and his son James. My noble friend mentioned the remarks which were attributed to the Foreign Minister of the Government of the Republic, Mr. Lenihan. In a statement about those remarks, which was issued early today, my right honourable friend the Secretary of State for Northern Ireland has made it clear that the joint studies which are going on between Her Majesty's Government and the Government of the Republic are intended to examine matters of common interest, including, incidentally, security, between the United Kingdom and the Republic. The studies are to improve relations between the two countries. The studies have nothing to do with, nor have they touched on, nor will they touch on, the internal government of Northern Ireland or its constitutional position. The Government and my right honourable friend the Prime Minister have repeatedly made this clear.
The noble Lord, Lord Boston, referred to the proposal which has been made previously by the noble Lord, Lord Wigoder, as to why the Act should not be reintroduced as a Bill. I recognise that in November 1974 the former Act was introduced rapidly in an emergency. But, as the noble Lord, Lord Harris, reminded us in his speech, it is only some three years since the Shackleton Report was drawn up, involving very wide consultations. It is just over five years since the present Act was introduced and that, in its turn, was the subject of detailed and intense scrutiny in Committee in this House and in another place over a period of some four months.
Certainly, on behalf of the Government, I responded to the proposal which was made on a previous occasion by the noble Lord, Lord Wigoder, that this matter should be properly considered. But, as I reminded your Lordships earlier on this evening, three vicious acts of terrorism occurred at about the turn of the year, and I am bound to say that in present circumstances my right honourable friend does not feel it right to repeat the process of going through the Act as a Bill, line by line, at the present moment.
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But in saying that, I am not suggesting that the Act is perfect. My right honourable friend made it clear in another place last week, that he was prepared to consider the proposals for review which the Opposition had made during the debate on this order in another place. Equally, the suggestions made by your Lordships this evening and the general attitude of your Lordships—if I may put it in that way—to this order this evening will be carefully studied and considered by my right honourable friend. This is a subject which demands and requires considerable detailed thought, and I would not pretend that with the present Act we have all the necessary elements in a perfect blend. But in the Government's view, there can be no doubt about the need for this legislation. I therefore move that this Act be renewed for a further 12 months.
On Question, Motion agreed to.

Charterhouse Japhet Bill
Examiners Certificate that no further Standing Order is applicable: Ordered to lie on the Table.