Lords Sitting of 27 October 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.

The Lord Llewelyn-Davies: Tribute
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, before we begin our proceedings today, I wonder if I might be permitted to transgress the usual custom of the House, just to say that many noble Lords will have been deeply saddened to hear that the noble Lord, Lord Llewelyn-Davies, died earlier today. I should like to express what I am sure will be the feeling of the whole House: that our profound sympathy at this time should be conveyed to the noble Baroness, Lady Llewelyn-Davies, and her family.
Lord Peart: My Lords, the whole House will be grateful to the noble Earl, Lord Ferrers, for expressing the sympathy we all feel with Lady Llewelyn-Davies and her family.
Lord Byers: My Lords, we wish to be fully supportive of what has been said on this very sad occasion.

Nordic Nuclear Weapon-Free Zone
2.36 p.m.
Lord Brockway: 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 is their attitude towards the proposal to establish a nordic nuclear-free zone covering Finland, Sweden, Norway, Denmark and an adjacent area of the Soviet Union.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Lord Trefgarne): My Lords, Her Majesty's Government have strong misgivings about proposals to establish a nordic nuclear weapon-free zone. We believe that these proposals do not take account either of the Soviet ability to make nuclear strikes on targets in Europe from deep within the Soviet Union or of the Soviet superiority in conventional weapons.
Lord Brockway: My Lords, while being very disappointed with his reply, in thanking the Minister may I ask this question: Does not this promise a major breakthrough in freeing Europe, East and West, from nuclear weapons? Has the noble Lord noted the statement of President Brezhnev that he will be prepared to discuss with the Governments concerned a large adjacent area in the Soviet Union. And supplementing the decisions of Bulgaria and Romania to join a nuclear-free zone in the Balkans, does not
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this indicate a hopeful development of communist attitude towards this issue?
Lord Trefgarne: Would that it did, my Lords, but unhappily this is not the case. In June President Brezhnev did make a vague reference to the possibility of considering measures concerning parts of Soviet territory that would border a nordic nuclear weapons-free zone, but subsequently the Soviet news agency explicitly rejected incorporation of either the Kola Peninsula or the Baltic in such a zone.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that there is widespread concern about the spread of nuclear weapons both in the East and the West? Is he not further aware that the idea of a nuclear-free zone in Europe has a respectable origin going as far back as Hugh Gaitskell and the Rapacki plan? Would he not look again at the Government's position in this matter?
Lord Trefgarne: My Lords, the Government consider their position in respect of these types of proposals—and there are a number of proposals which are discussed from time to time—from the point of view of our own security, among other things, and our security would most certainly not be served by creating a nuclear weapons-free zone in Europe, or confined to further North, while the Russians retain the ability to fire their missiles at us from their own territory.
Lord Boyd-Carpenter: My Lords, do not questions of this kind, whose only effect if implemented would be to weaken the military power of the western alliance, serve no purpose other than to strengthen the aggressive power of the Soviet Union? Would they not be more convincing if just occasionally an anti-nuclear demonstration were staged in the streets of Moscow?
Lord Trefgarne: My Lords, I think there is considerable force in what my noble friend says. But, having said that, we certainly would not dismiss all these proposals out of hand. We would examine each and every one on its merits.
Lord Davies of Leek: My Lords, is the noble Lord aware that the last sentence of that reply—that we would not dismiss out of hand what the Soviet Union says—brings us to the logical point that if we never believe anything that the USSR leaders say we can never get agreement, and that each step and moderate statement towards that is a worthwhile step on the path of a joint effort to build up peace?
Lord Trefgarne: My Lords, it is not a question of believing or disbelieving what they say, although I must say our credibility has been strained from time to time, but of examining these proposals on their merits. The particular proposal which is put to us now is one that we think would unduly expose us to the threat we hope to avoid. The fundamental difficulty is that none of the proposals include provision for moving the Soviet SS20 missiles out of range of Europe.
Lord Duncan-Sandys: My Lords, is not this an unrealistic proposal, and would it not be seen by the

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world as the first step towards the abandonment by Western Europe of the will to defend herself?
Lord Trefganre: My Lords, I believe there is considerable force in what my noble friend says.
Lord Molloy: My Lords, would not the noble Lord agree that if there should be some degree of agreement it might be the commencement of the abandonment of the suicidal policies now being followed by the powerful nations on earth? Therefore, would it not be a possibility for Her Majesty's Government to consider encouraging both the United States of America and the Soviet Union to have this item on their agenda in November, notwithstanding that the immediate proposals would be objectionable to the USA? But perhaps from these, with bargaining and discussion, progress might be made along the road to sanity.
Lord Trefgarne: My Lords, I certainly hope that the talks to which the noble Lord referred which are to begin at the end of November will make some progress on the matters which will be under discussion. But the proposal contained in the Question of the noble Lord, Lord Brockway, is so one-sided that it would have to be substantially modified before it could form any basis of discussion.
Lord Brockway: My Lords, has the Minister noted the statement by Mr. Michael Foot that he hoped that the coming Labour Government would join this North European nuclear-free zone? In view of that, will the Government reconsider spending their billions on the Trident which will be scrapped under those circumstances?
Lord Trefgarne: My Lords, if ever the right honourable gentleman succeeds to No. 10, which, I suggest, is not exactly a likely prospect, then I suspect that his policies will have to be modified in accordance with the reality of the situation that he will then find.
Lord Kennet: My Lords, is it not the case that the nuclear-free zone favoured by Mr. Rapacki when he was Foreign Minister of Poland, and by Hugh Gaitskell when leader of a different Labour Party, would have been in both Western and Eastern Europe roughly equally?
Lord Trefgarne: My Lords, I am not familiar with the elderly proposal to which the noble Lord referred —doubtless it had its merits in its day. However, the present problem is that the range of nuclear weapons available to the Soviets—and I mean range in terms of the distance that they will carry—is such that they would have to go a very long way East to cease to be a threat to Europe.

Youth Work Creation Schemes: Costs
2.45 p.m.
Lord Campbell of Croy: 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 difference in the net cost of creating a place under the Youth Opportunities Programme and under the Young Workers' Scheme.
Earl Ferrers: My Lords, the Youth Opportunities Programme and the Young Workers' Scheme are not comparable in terms of net costs per place. However, the present net cost of a YOP place is around £24 per week. It is not possible to state the net cost of the Young Workers' Scheme, first because it does not start until 4th January 1982, and secondly because there will be too many unknown factors to permit any reasonable degree of accuracy in such calculation.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for that reply and recognise that it is probably too early to make even a rough comparison now. However, how many additional jobs do the Government hope the Young Workers' Scheme will produce during 1982 after its start in January, applying as it does to under-18s in their first year of work and, therefore, being especially relevant to school-leavers?
Earl Ferrers: My Lords, it is very difficult to forecast with any accuracy what the position will be. However, the operating assumption is that the coverage is likely to build up within a few months to between 50,000 and 100,000 young people.
Lord Davies of Leek: My Lords, is the noble Earl aware that in the Guardian today there is an interesting suggestion that the cost to the Government of keeping some of these young workers in work is somewhere in the neighbourhood of £2,000? Would it not be worthwhile to give grants to some unemployed students who have their A-levels and who are qualified to go to university and worthy of a university place—for there are plenty of university places—thus enabling progress to be made in Britain and increasing our adaptability to the new world?
Earl Ferrers: My Lords, I had not seen the article to which the noble Lord referred and of course the difficulty is that it is very simple to make calculations of that nature without going into all the complexities of the position. I would only tell the noble Lord that the whole purpose of both the Youth Opportunities Programme and the Young Workers' Scheme is in order to try to alleviate the problem of unemployment which is affecting young people.
Lord Orr-Ewing: My Lords, did my noble friend note in The Times profile of the Manpower Services Commission that it was reported that the cost of training young people could be as much as £2,000—£40 a week—rather than the £25 cost mentioned by my noble friend in his first reply? Can he say exactly what is taken into account in the £25 per week costing as opposed to the £40 a week costing reported in The Times and repeated in a letter in that paper today as well?
Earl Ferrers: My Lords, when you take into account the gross cost it covers all the costs of the scheme,

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including the administration and the purchases of materials and so forth. I would remind my noble friend that under the Youth Opportunities Programme there are some four schemes: the work experience scheme, the community projects, the training workshops and the work preparation courses in colleges of further education. The gross costs of these schemes vary from between about £30 to over £100. The average gross cost is £40. From that you then have to subtract the benefits which would otherwise have been paid, which are round about £16, which gives you the net cost of £24.
Lord Oram: My Lords, while recognising the difficulty of making comparisons between two distinctly different schemes, is the Minister aware that The Times recently forecast that places under the Young Workers' Scheme would be very costly and that it went on to explain that the cost would be high because the scheme, by its very nature, subsidises a high proportion or jobs which would have been created anyway? In other words, are not the Government proposing to pay employers to do something that they were in any case going to do? If that is so, is it not a somewhat ironical, but perhaps perfect, complement to the Government's decision recently in the Wildlife and Countryside Bill to pay farmers for not doing what they were not proposing to do anyway?
Earl Ferrers: My Lords, the noble Lord, Lord Oram, is ingenious. Of all the questions which one might have anticipated, I never thought that the Wildlife and Countryside Bill would come up under this Question. He is perfectly correct in that some of the money which will be paid under the Young Workers' Scheme will go to those who, anyhow, will have been employed. That is why it is difficult to answer my noble friend Lord Campbell of Croy. Of course, the advantage of this is that it is a payment to employers to make the work of young people more attractive, and the administration is very small. In other words, all the expense of the scheme goes to the purpose for which it is required, which is to encourage the employment of young people.
Lord Alexander of Potterhill: My Lords, will the Minister agree that because of the nature of the society in which these young people will live the fundamental need, rather than work experience, is to raise their educational standards so that they can be trained for the kind of technological society in which they will live? Are the Government not failing to recognise this problem and to make provision for it?
Earl Ferrers: My Lords, that is a very important point, but I do not think it is the whole point. Many people have perfectly good training but are unable to get jobs. The purpose of both these schemes is to encourage these people to get jobs, whether or not they have training.
Lord Wallace of Coslany: My Lords, is the noble Earl aware that both these schemes, however desirable, are in fact temporary expedients, and that the only worthwhile objective of the Government is to ensure a situation where a young man or girl leaving school
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can get an adequate, progressive job and receive training which will benefit not only him or her but the country as a whole?
Earl Ferrers: My Lords, the noble Lord, Lord Wallace, is absolutely right; of course, these are temporary expedients. But we are going through a period of great recession and of great human discomfort. The Government are doing their best to try to ensure that the temporary position is alleviated while, at the same time, ensuring that the future of the country depends upon being competitive.

Disabled People: MSC Recommendation
2.52 p.m.
Lord Campbell of Croy: 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 what consultations and other action they are carrying out upon the recent recommendation by the Manpower Services Commission that the quota scheme for employment of disabled people, established by legislation in 1944, be replaced by a new general obligation for employers, linked to a code of practice.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Elton): My Lords, as was announced on 23rd July, the Government are giving interested parties and individuals until the end of this year to comment on the commission's proposals, before coming to any decisions on the future of the quota scheme.
Lord Campbell of Croy: My Lords, I thank my noble friend for his reply. Is he aware that some organisations representing disabled people are very worried at the prospect of the abandonment of the quota, in spite of the fact that the quota of 3 per cent. has in practice become a target only rather than an obligation? Does my noble friend agree that one of the main problems has been that many disabled people seeking work have not wanted to be registered?
Lord Elton: My Lords, I can certainly reassure my noble friend, whose work for the IYDP in Scotland is widely regarded, that there is no question of abolishing the quota scheme without looking at it in the light of what is thrown up by discussion of this paper. I also take on board what he says about the effectiveness of the quota scheme. As, in fact, only 2 per cent. of the workforce is at present registered as disabled, it is physically and mathematically impossible for all employers to honour the 3 per cent. undertaking.
Baroness Lane-Fox: My Lords, is my noble friend aware that as there are those who stick to this misguided belief in the quota system, the facts, which show it to be ineffective and virtually unworkable, should be made better known so that the merits of the MSC's review of the system and the alternatives suggested therein are more widely recognised?
Lord Elton: My Lords, the Government issued a press statement on 23rd July to draw the general public's attention to this review and I trust that interested parties will indeed look closely at how the quota scheme is working.
Lord Molloy: My Lords, is the noble Lord aware that many of these well-meaning schemes to help, assist and encourage the disabled to earn a living and to make their contribution have never fully fructified because of some employers dodging the issue? One of the things that we ought to consider is a method of enforcement of the law of this land and punishment for those who so dishonourably and disgracefully evade their responsibilities to the disabled folk of our nation.
Lord Elton: My Lords, that is perhaps less easy to achieve than the noble Lord thinks. We have looked at the scheme used in, for instance, Germany where a levy is imposed on firms which do not honour their obligations. The danger is that some firms regard the levy as being an acceptable imposition in order not to honour the obligation; on the other hand, firms which cannot afford to pay the levy find themselves disadvantaged.
Lord Campbell of Croy: My Lords, will my noble friend ensure that the consultations being carried out are very wide and that enough time is given for bodies representing the disabled, employers and trade unions to put forward their views?—because one hopes that a better scheme than the quota scheme can be produced, but many people will need to be convinced that it is a better one.
Lord Elton: My Lords, both organisations and individuals have until the end of this year to make known their views. It is not surprising, therefore, that so far we have received only about three dozen submissions from organisations and individuals. I trust that the attention which the noble Lord has drawn to this issue by asking this Question will help to get others to interest themselves in this important matter.

Interest Rates
2.56 p.m.
Lord Beswick: 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 whether since 15th June 1981 they have taken any initiative with other countries of the EEC to secure agreement designed to prevent competitive interest rates.
The Minister of State, Treasury (Lord Cockfield): My Lords, my right honourable and learned friend the Chancellor of the Exchequer has discussed the level of interest rates with his counterparts from Governments of the European Community and other states on various occasions in recent months. At these meetings the Governments of several major European and other industrial countries have renewed
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their commitment to the firm fiscal and monetary policies which hold out the best prospect of lower and more stable interest rates for the longer term. This message emerged strongly from the September meeting of the IMF Interim Committee, the advisory group representing the whole membership of the fund.
Lord Beswick: My Lords, as always, I am much obliged to the noble Lord for his Answer. However, does he not remember that when I put down this same Question on 15th June he then told me that the initiatives that I had in mind would not be useful but that the Government relied on:
"firm fiscal and monetary policy"? [Official Report; col. 431.]
Is it not a fact that since 15th June we have had a firm fiscal and monetary policy? Is it not also a fact that since then interest rates have increased by a further 2 per cent.? Is it not a further fact, despite what the noble Lord said about the IMF meeting, that we are out of step with our French and German friends in making representations to the United States about their high interest rate policy?
Lord Cockfield: My Lords, far from being out of step, the position is that the United Kingdom—in common with most other industrialised countries—believes that a firm monetary and fiscal policy is essential as a means of both dealing with inflation and, in the longer term, achieving lower rates of interest. We do, of course, all regard the present level of interest rates as a matter of grave concern, but we need to remember the reasons why those rates of interest exist. Most major countries, including this country, have very substantial budgetary deficits, and it is the existence of those budgetary deficits and the large amount of borrowing that they entail which forced up interest rates to the present level. If I may say so, it was a very considerable achievement on the part of my right honourable and learned friend to have reduced the rate of interest at the time of the Budget and to have kept it down over a period of a good many months.
Lord Beswick: My Lords, does not the noble Lord understand that many of us agree with the need for a firm monetary policy? But can he not also see that the high interest rates are, in fact, frustrating that policy? Is it not a fact that they are putting up costs at the same time as he is making his cuts? For example, has the noble Lord noticed that the 2 per cent. extra interest on the Treasury stock issued last month—the 2 per cent. extra, not the shameful total—precisely equals the £20 million cut they are making in the university grant this year? Are we really on the right lines if we cut down on education in order to increase the amount that goes to the moneylenders?
Lord Cockfield: My Lords, it is, I am afraid, a fallacy to believe that high interest rates add to inflation. They have precisely the reverse effect. They represent one of the major weapons in getting inflation under control. It is because of the burden of interest to which the noble Lord rightly draws attention—we are just as much concerned about it as he is—that we need to follow not only a strict monetary policy but a

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strict fiscal and financial policy as well. This in fact is what underlay my right honourable friend's strategy at the time of the Budget.
Lord Morris: My Lords, would not my noble friend agree that so much misunderstanding on this particular point arises from the fact that interest rates are more a symptom than a cause?
Lord Cockfield: My Lords, I am obliged to my noble friend for his intervention. Interest rates of course are the result of the need to borrow large sums of money. The need to borrow large sums of money flows from the size of the Budget deficit, and that is why it is important to do everything possible to bring the size of the Budget deficit down.
Lord Shinwell: My Lords, may I ask the noble Lord, Lord Cockfield, a question? He informs your Lordships' House that high interest rates have a beneficial effect so far as inflation is concerned; they do not increase inflation. If they are not detrimental to inflation, then why not allow interest rates to increase, and have the uncertainty, so that inflation can be controlled?
Lord Cockfield: My Lords, I appreciate the dilemma that the noble Lord is trying to pose, but I think we must recognise what an important burden interest rates are on the individual business as well as on the individual, and our policies are directed to bring interest rates down when that is possible.
The Earl of Halsbury: My Lords, do we need to couple the interest rate we use to defend the purchasing power of our currency to the interest rate necessary to control inflation within the economy? At the moment it would appear that the tail is wagging the dog and we are controlled by American rises in interest rates to defend their foreign exchange position, rather than that necessary to defend our economic position.
Lord Cockfield: My Lords, the present level of interest rates depends upon domestic as well as on international factors, but it is quite impossible to separate the one from the other. We could not in practice, having regard to the very large proportion of our gross national product which comes from international trade, live in isolation inside a ring fence.
Lord Bruce of Donington: My Lords, will the noble Lord explain why it is that the adviser to the Prime Minister, Mr. Alan Walters, at the time of his appointment went on the record as saying that high interest rates were in fact a contribution towards inflation? Will he endeavour to see that those views are reconciled with his own on this matter?
Lord Cockfield: My Lords, I would be happy to read the speech of Professor Alan Walters, to which the noble Lord refers, and I have no doubt that Professor Walters would let the noble Lord know his views on that subject.
Lord Beswick: My Lords, may I just ask the noble Lord whether he does not think it is possible that the
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high interest rate policy has something to do with the facts which were reported in the Monthly Economic Assessment two months ago, that in the case of non-oil companies in this country their undistributed income fell by one-third while that
"contrasts markedly with that of the financial companies and institutions whose undistributed income doubled in the same period"?
Is not this what is happening in our economy at the present time? We are frustrating the useful wealth producers in order to reward, or in fact are actually rewarding, the moneylenders?
Lord Davies of Leek: Usurers, not moneylenders.
Lord Cockfield: My Lords, it is of course the position that in a period of inflation there is a considerable redistribution of income between different sectors in the economy. These are sometimes redistributions which give rise to criticisms of the kind to which the noble Lord refers, but the answer to this is to eliminate inflation and the need for interest rates at this level. It is not simply to complain about the results.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that dinner will be available at the usual time this evening. The House will adjourn for a short period at approximately seven o'clock.
My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Belstead will, with the leave of the House, repeat a Statement that is to be made in another place on the bomb incidents in London.

Standing Orders (Private Business)
3.6 p.m.
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the first Motion standing in my name on the Order Paper. This makes various proposals for the amendment of Private Business Standing Orders, and the second Motion in my name makes amendments to Public Business Standing Orders. All these amendments arise from the Third Report of the Procedure Committee of the House, to which your Lordships have already agreed, and therefore they are to that extent procedural amendments. I beg to move the first Motion standing in my name on the Order Paper.
Moved, That the Standing Orders relating to Private Business be amended as follows:
Standing Order 95
After paragraph (3) insert the following new paragraph:
"(4) In the absence of any chairman appointed in pursuance of paragraph (3) of this Standing Order a committee may appoint its own chairman."
Standing Order 216
Paragraph 3, line 3, after "above" insert "or

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if every Petition, or the only Petition, so received is withdrawn,".
Paragraph 4, line 5, leave out "a Lord of Appeal as Chairman".
Paragraph 7(a), leave out from the beginning of line 3 to "or" in line 5.
Standing Order 216A
Paragraph 3, line 2, after "days" insert "or if every petition, or the only petition, so received is withdrawn,".
Paragraph 7(i), line 2, leave out from "Order" to "or" in line 5.—(Lord Aberdare.)
On Question, Motion agreed to.

Standing Orders (Public Business)
Lord Aberdare: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the Standing Orders relating to Public Business be amended as follows:
Standing Order 55
Line 3, leave out "appended to the Minutes of the Day and".
Standing Order 60
After paragraph (3) insert the following new paragraph:
"(3A) In the absence of any chairman appointed in pursuance of paragraph (3) of this Standing Order a committee may appoint its own chairman.".—(Lord Aberdare.)
On Question, Motion agreed to.

London Transport Bill
Lord Aberdare: My Lords, this is one of the usual Motions for carrying a Private Bill over and allowing it to proceed on its way through Parliament in the next Session. I beg to move.
Moved, That the Promoters of the Bills have leave to suspend any further proceedings thereon, in order to proceed with the Bills, if they shall think fit, in the next Session of Parliament, provided that notice of their intention to do so be lodged in the Office of the Clerk of the Parliaments not later than three o'clock on the day before the close of the present Session, and that all fees due thereon up to that period shall have been paid;
That such Bills shall be deposited in the Office of the Clerk of the Parliaments not later than three o'clock on the third day on which the House shall sit after the commencement of the next Session of Parliament, with a declaration annexed to each, signed by the Agent, stating that the Bill is the same in every respect as the Bill at the last stage of the proceedings thereon in this House in the present Session;
That the proceedings on such Bills shall in the next Session of Parliament be pro forma only in regard to every stage through which the same shall have passed in the present Session, and that no new fees be charged to such stages;
That the Standing Orders by which the proceedings on Bills are regulated shall not apply in the next Session of Parliament to such Bills in regard to any of
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the stages through which the same shall have passed during the present Session.—(Lord Aberdare.)
On Question, Motion agreed to, and a Message ordered to be sent to the Commons to acquaint them therewith.

Companies (No. 2) Bill [H.L.]
3.8 p.m.
Lord Trefgarne: My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Trefgarne.)
Lord Bruce of Donington Lord Bruce of Donington rose to move as an amendment to the Motion "that the Commons amendments be now considered" at end to insert—
"but this House deplores the fact that Members of this House have had only four days (including Saturday and Sunday) to examine the 242 Commons amendments; to relate them to the Bill [134] as first printed for the Commons; to formulate, if necessary, any amendments thereto; to consult with the professional, industrial and commercial interests affected by them; and places on record its displeasure at the treatment accorded to Members of this House by Her Majesty's Government.".
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I should like to assure your Lordships that this amendment has not been put down as a means of in any way trying to impede the progress of the Companies Bill through the House. It raises no constitutional issue at all. At the end of the day, whether it be today or whether it be tomorrow, it is quite inevitable that the Government will get the House's assent to the agreement to the various amendments that have come from another place.
We on this side of the House would not wish in any way to avoid the constitutional consequences. What we seek to do is to raise, if I may say so, an institutional question; a question affecting the relationship of this House with those in another place who control the business in another place and who therefore have a very considerable influence on, and indeed determine the timing of, legislation in this House. The charge I make is not against the noble Lord the Government Chief Whip and his department; they have been most co-operative in the entire matters that are the subject of this amendment. The gravaman of my complaint is that those in charge of business in another place have made it impossible for this House to discharge its obligations in regard to the Bill.
I will briefly reiterate the history of the Bill so far, because it is important that we should understand precisely what has happened. Your Lordships will recall that it was first published as a House of Lords Bill on 3rd February. We had a Second Reading in this House on 26th February and it went into Committee in your Lordships' House on 11th, 17th, 19th, and 23rd March, and when it finished here it had four parts, some schedules, 75 clauses and it was 125 pages long; it was slightly larger than when it first arrived because some extra clauses were introduced while it

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was going through this House. However, it did not leave here very much bigger in Committee than when it arrived. On 6th and 7th April we had the Report stage in this House and at the end of Report, because several more new clauses were added, it had 131 pages as against its original 109.
On 5th May it was brought before the Commons and on 2nd June it had its Second Reading. From 9th June to 9th July the Commons were in Committee on the Bill and when it emerged from Committee there it had increased in size to five parts plus the schedules, the number of clauses had increased to 106 and there were 165 pages. There was then a long pause, for over three months, and on the reassembly of the other place on 19th October, the Report stage took place and during that stage 14 new clauses were added, 13 by the Government and one accepted from the Opposition. That is roughly the history of the Bill.
As a consequence of all those events, noble Lords were last Friday presented by the Commons with 246 amendments to which our concurrence was invited, and the consideration of those is down for today. It cannot be said that those amendments are of a trivial, consequential or minor nature. Some of them of course are, but I have analysed the 246 amendments and have found that no fewer than 43 comprise new clauses and occupy 48 pages, and of those 43 amendments, no fewer than 14 were tabled on Report for consideration on 19th October last, including the one to which I referred that was put forward by the Opposition in another place and accepted by the Government. A further analysis reveals that the 246 amendments require 88 cross-references, needing checking with other Acts of Parliament, mainly those concerned with amendments to the Companies Acts 1948 to 1976 and the Companies Act 1980.
These are formidable considerations and we are complaining not because the time for discussion in this House of the amendments is likely to be curtailed—I repeat, the noble Lord opposite has offered extra time tomorrow should it be necessary to flow over and give more time—but because there has been no time for those Members of this House who are interested (and there are many, he they lawyers, accountants, businessmen, commercial people and so on) to consider in detail the impact of the amendments made in another place and which, as I say, were not in our hands until last Friday morning.
It has taken me from Friday morning until roughly 11.30 this morning, working on Saturday and Sunday, interpolating the various amendments where they should be in the Bill, to be able to understand exactly what has been done, let alone to formulate any view as to the correctness or otherwise of the amendments that have been made, whether they could conceivably be improved or whether further outside professional advice (from, say, the Law Society or the Consultative Committee of Accountancy Bodies) should be sought on specific items, particularly those which were introduced only on Report. And incidentally lest anyone has any illusion about it, those 43 amendments are not two or three line affairs; they occupy 48 pages, or half the original size of the Bill.
Those amendments cover a variety of subjects and are of a strictly non-party character in the sense that
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I do not think their contents are likely to arouse party passions on either side. But they comprise some important proposals for, for example, financial assistance for the acquisition of shares and special provisions in connection therewith as regards private companies. They also touch on the important matter of a company's purchase of its own shares and a company's purchase of its own shares out of capital. Those are not world-shattering matters for the general public, but they are of very considerable importance to industry and commerce and are of particular importance to those of us who have to advise, either as accountants or lawyers, on the form in which particular transactions should take place and, moreover, on the accounting consequences of the actions they propose to take if those actions are to comply strictly with the law. These are highly important questions. Some of the amendments deal with insider dealings, the prohibition on directors of insolvent companies, registers of part-directors, privileged information, and they cover some important aspects of voluntary liquidations and the like.
In other words, we are not dealing with trivia. Consider the important amendments, my Lords—and so far I have dealt only with the new clauses. In addition to new clauses, there are about 10 extremely important amendments (occupying 13 pages) of which five were made available only on 19th October last. They cover extremely important aspects of company law. So we are not dealing with trivial matters.
What is the result of this situation? I have already indicated the time that it has taken working full out —and I am no sluggard when it comes to working at this kind of thing—to go through the amendments in order to arrive at a position where one can understand, follow and trace exactly what the Government have done ever since the Bill went to the other place. I am sure that the noble Lord opposite would agree that when Bills of this kind come before your Lordships' House, it is the duty of an Opposition Front Bench spokesman, or one or two of them for that matter, to make themselves fully acquainted with the position to which the amendments relate, in order that they can both carefully follow the case for the amendments that is put up by the Government and draw the attention of the House to matters on which the House may wish to pronounce judgment.
Therefore, the position is this. Speaking personally, as someone who took an active part in the Second Reading and Committee stage of the Bill in this House, I have been unable to put down any amendments at all because there has simply been no time to carry out the complete appraisal of a Commons amendment that is necessary before one starts to try to amend it. All the amendments that are down in our names today have been prepared, with very great speed and under considerable stress, by my noble friend Lord Wedderburn of Charlton, who, as the House will know, is an expert in this particular field, and even he will say that much more time was required in order to put down proper amendments.
The other aspect of the position is that I have been able to contact outside professional opinion closely associated with the Consultative Committee of Accountancy Bodies. I received observations by telephone yesterday. In the middle of other work I was

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able to scribble them down on the backs of envelopes, and I shall try to appraise them while the debate proceeds. At this stage I can give the House the view of the profession, so far as I have been able to ascertain its position in regard to some of these long and complicated amendments, and the verdict is that they are diabolical and that they will in fact cause very considerable difficulty in the professions themselves.
It might be argued—the noble Lord might argue it in reply—that this is of course only tit for tat, that other Governments of my political persuasion have done precisely the same thing, in precisely the same circumstances, and that therefore that somehow justifies the present situation. It might be thought that I am saying that the Tory party has done it this time, and perhaps the noble Lord will rise and say that the Labour Party did it last time, and so it is six of one and half a dozen of the other. I very much doubt whether the noble Lord will be able to recall an occasion when the House has been invited to consider, within the time limitations that I have indicated, and which are quite factual, 43 new clauses, covering 48 pages. But even assuming that he can, and even assuming that a Government of my political persuasion has in fact done an identical thing in the past, I would not try to justify it. Had I been here at the time that such a thing occurred, I would have protested just as diligently as I am protesting today, and should such a thing ever happen again, most certainly I shall be one of the first to protest about it.
The other answer that could be given is that it is always open to us, to Members of this House, to follow closely the deliberations in another place. It could be argued that those of us on all sides of the House who are interested in the Bill could have searched through the colossal document covering the Committee proceedings in another place and so been forewarned and forearmed. Of course that completely begs the question in that the Commons operate on a different Bill, they operate under different pagination than do we, and it is not easy to relate the amendments that they make to the Bill that they consider with the Bill that we have to consider. It would be a very formidable job to trace the points through.
The other factor that operates against the situation even more than that is that most of your Lordships on this side of the House, and on the other side, save those who are fortunate enough to have an income on which to retire, have to earn their own livings during the day, and of course time is necessarily restricted. So I do not think that the horse about closely following what happens in another place will run.
The question is quite simply this: Do we believe in a bicameral legislature? Do we believe in the continued existence of this House as a revisory Chamber? That is the real question. Of course it can be argued that the Minister is so well advised in the drafting of particular clauses, which most of your Lordships have not had the opportunity to examine, that the House is quite safe in relying on his saying: "It is really not necessary for your Lordships to look at them at all, because the parliamentary draftsman is so expert, our intentions are known, and therefore no real harm is done by your Lordships not having the opportunity to study them and to put down your own amendments".
I invite your Lordships to consider the serious impli-
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cations of that argument, because if it is the argument that is advanced, then it is an argument for the abolition of this Chamber; that is precisely the argument. If it is unnecessary to perform our function, why should we go through the pretence of performing it? For the past 50 years there have been moves towards abolishing the House of Lords, and I believe that at the moment there is some dubiety as to the position of the House of Lords so far as the Labour Party is concerned. However, in view of the troubles that the Labour Party will inherit on regaining power, one never knows, when it comes to action, what priority will be given to that question. So far as I am concerned that is quite immaterial. So long as your Lordships' House continues, it should be enabled to perform, and should insist on performing, its proper function. I am surprised that the Conservative Government, who have arranged business in another place, and who are supposed to be all in favour of the retention of this House, in perhaps more legislative form, should put forward an argument such as is now before us.
I hope that the House will be persuaded that I have raised this matter quite temperately and on an absolutely non-partisan basis. This is a constitutional question which affects our own House. Obviously I cannot invite the Front Bench opposite, but I invite your Lordships, in whatever part of the House you sit, to support this amendment when it goes to a vote, because a vote against the amendment that I have ventured to put on your Lordships' Order Paper would in fact be a vote for the abolition of the House of Lords.
Moved, as an amendment to the Motion "that the Commons Amendments be now considered" at end to insert—
"but this House deplores the fact that Members of this House have had only four days (including Saturday and Sunday) to examine the 242 Commons Amendments; to relate them to the Bill [134] as first printed for the Commons; to formulate, if necessary, any amendments thereto; to consult with the professional, industrial and commercial interests affected by them; and places on record its displeasure at the treatment accorded to Members of this House by Her Majesty's Government.".
—(Lord Bruce of Donington.)
3.30 p.m.
Lord Lloyd of Kilgerran: My Lords, whatever may be the reasons why your Lordships find yourselves in the uenviable position of having to deal with these complex amendments at such short notice—amendments to a Bill of very considerable commercial importance—I am personally satisfied at least that the existing parliamentary procedures which have given rise to this situation are heartily to be deplored. First of all, from time to time these procedures have been shown in practice to be inconsistent with, and inappropriate to, a modern parliamentary democratic system for dealing with legislation of this nature, which is merely technical and largely non-controversial from a political point of view. Secondly, these procedures—and I urge the Government to endeavour to modify them in some way—have today resulted in there coming before your Lordships' House to be

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amended a Bill which, when it is passed (as of course it will be) will put a heavy burden on commercial and industrial interests already hard-pressed at the present time.
As the noble Lord, Lord Bruce of Donington, has indicated, it seems that many of the amendments are largely incomprehensible; their elucidation in the context of the business of individuals, firms and institutions will undoubtedly need the expenditure of vast sums of money; and, once again, professional advisers, whether they be lawyers or accountants, will no doubt benefit substantially. The haste with which this Bill has been put together is well illustrated by a new clause which purports to deal with the relaxation—and I emphasise the word "relaxation"—of certain restrictions for private companies. I think it is Amendment No. 62. This new clause, ironically intended to induce some sort of relaxation, is over two pages long and has nine subsections, and one of these subsections comprises a sentence of about 320 words.
I doubt whether a search through the whole of the statute law of this country would unearth a sentence of more fuliginous obscurity. That phrase is an oft-quoted phrase of the late Lord Justice McKinnon in a dissenting judgment in the Court of Appeal in a famous trade mark case called Bismag v. Ambling, when, late in the afternoon, he was called upon to construe a clause of a mere 253 words in the Trade Marks Act. I am sure that if this subsection of the new Amendment No. 62 comes before the Court of Appeal it will also induce some kind of relaxing observations, as did the other clause before Lord Justice McKinnon. I must say that I am very pleased to see that the noble Lord, Lord Wedderburn, will be asking your Lordships not to agree with Amendment No. 62 which has come to us from the other place.
I must agree, however, that this Government alone are not wholly responsible for the unsatisfactory position in which your Lordships find yourselves. If I am critical of the Government, I am not in any way criticising the Ministers who have been dealing with the Bill. The noble and learned Lord the Lord Advocate has always been courteous and cogent in dealing with these intricate matters. As for the noble Lord, Lord Trefgarne, I am increasingly in admiration of his versatility and of his ability to grasp the essentials of complicated matters. I should also like to recognise the vast amount of work which has been done behind the scene by civil servants and others, particularly during the last Summer Recess, in dealing with the many representations that have been made to the Government about this Bill.
My Lords, as I have indicated, this Bill is basically highly technical and contains matters on which there should be the minimum of political controversy. However, the Bill is a remarkable example of legislation having to be conducted by second or third thoughts, thus leading to these most unsatisfactory results. In my view, of course, it was premature for the Government to have ever introduced another Companies Bill in this year, but I am not going to trace the history of the Bill as it left this House a much better Bill, as it went to the other place and as it has now come back with these amendments.
During the Summer Recess discussion still ensued, as
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I have said, between Government departments and outside bodies, and new amendments arose even as late as this month. I suppose that in some ways the Government should be praised for being so flexible in these matters as to consider representations from outside bodies up to the last minute. But our parliamentary procedures, as I again emphasise, are ill-equipped to deal with a technical Bill of this kind, where the issues are non-controversial. I therefore again urge the Government to consider how these procedures may be modified to make them more flexible and helpful, particularly in regard to legislation of importance to British trading interests.
Therefore, my Lords, for a wide variety of reasons I am really appalled at the problems with which companies and their advisers will be faced in trying to understand whether much of this Bill has application to their business interests. Accordingly, I shall support the amendment moved by the noble Lord, Lord Bruce of Donington.
3.37 p.m.
Lord Denham: My Lords, I think it might possibly be for the convenience of your Lordships' House if we were to take the Statement next, which I understand has been cleared.

Bomb Incidents in London
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, with the leave of the House, I will now repeat a Statement being made in another place by my right honourable friend the Home Secretary. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement.
"The House is aware that at about 4 p.m. yesterday afternoon a bomb exploded in a Wimpy Bar in Oxford Street, killing Mr. Kenneth Howorth, a Metropolitan Police Explosives Officer. Mr. Howorth had entered the building following an anonymous phone call received by Reuters news agency at 2.50 p.m., warning that three bombs had been placed in shops in Oxford Street, the other two places being the department stores Debenhams an Bourne's. Subseqently an explosive device was found in Debenhams and made safe. Despite an intensive search a third device has not been found. Subsequently the Provisional IRA have said they were responsible.
"The House will wish to express its revulsion at this vicious act. It will also, I am sure, wish to join in paying tribute to the courage and dedication to duty of Mr. Howorth. Our deepest sympathy goes to his widow and family. We all owe a tremendous debt of gratitude to those who, like Mr. Howorth, risk their lives to protect us.
"This is the third bombing incident this month in London for which the IRA have said they are responsible. In the first, at Chelsea barracks, two people were killed. The second was the attack on Lieutenant-General Sir Steuart Pringle. The House will wish me to place on record our deepest sympathy to the relatives of the victims of the first attack and our tribute to the courage of Sir Steuart.

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"The emergency services have responded swiftly and efficiently on each of these occasions. I can assure the House that the police are taking all possible steps—as they have done with success in the past—to bring the criminals to justice.
"I should like to underline what the police have already said. They need help from the public and, above all, vigilance. Any suspicious objects or actions should be reported to the police immediately."
That, my Lords, concludes the Statement.
3.40 p.m.
Lord Boston of Faversham: My Lords, the House will be grateful to the noble Lord, Lord Belstead, for repeating that Statement. We all share in the sense of outrage at this despicable, cowardly and criminal attack and join in condemning it totally. We have all too often had occasion in this House to praise the work of the bomb disposal experts, the police and the other emergency services. Those expressions of our gratitude and admiration have been just as heartfelt when there has been no injury or loss of life as when there has been. But yesterday's incident really does show all too clearly how completely justified are our praise and admiration. We hope that the deep sympathy we all feel can be passed on to the relatives of Mr. Kenneth Howorth, a most courageous man. We also join in expressing our deep sympathy to the others who suffered from this attack and from the other attacks that the Minister has mentioned. Once again, we join in praising the work of the services I have referred to. Perhaps I could join in commending the high example, in terms of both courage and devotion to duty, set by General Sir Steuart Pringle, which was not only an outstanding example to his men but, I believe, to us all.
I have only one question to put to the Minister. It is clear from this latest attack that it is not solely identifiable and prominent targets which are in danger but that those responsible are once again launching indiscriminate attacks. I do not wish in any way to be alarmist but I believe that the public wish the facts to be faced. Therefore it continues to be of great importance, as the Minister has said, that everyone remains vigilant. I would ask the Minister whether he is satisfied that everything possible is being done both to keep the public on the alert and to take all the precautions which can be taken—while it is recognised that there is a limit to what can be done there. My Lords, I would only make one further point in connection with this Statement and this attack. Your Lordships will have heard or read of the statement of those who say that they were responsible and of their expression of concern for the dangers faced by the children of Northern Ireland. I confess that I am tempted to say that, coming from that source, that statement amounts almost to an obscenity. If they are so genuinely concerned about the safety of men, women and children as we all are, then they have it in their power to end those dangers by stopping these criminal acts. It will not have escaped your Lordships' notice that this is half-term for very many schools and the likelihood is that there are more children about. While it is always difficult to draw any distinctions between one target and another, one is bound to feel that there is something particularly grotesque
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about choosing times and places where more children are likely to be about. We join the noble Lord in hoping that those responsible will be brought speedily to justice.
Lord Wigoder: My Lords, we, too, should like to add our tribute to the bravery shown on this occasion by Mr. Howorth and on so many other occasions in the past by him and his colleagues. One has only to imagine the work involved to realise the courage that is required and the quiet and unostentatious way in which their tasks have been carried out. The only other observation I would make is to query the way in which, after each of these outrages, it is reported in the media that a particular organisation "claims responsibility "—an expression which seems to me to lend an aura of respectability to these outrages. Is not the straightforward fact that what such an organisation is doing is either admitting its guilt or confessing to a serious criminal offence? Would it not help in a very small way if we were to use the appropriate terminology?
Lord Belstead: My Lords, I know that the expressions of sympathy and admiration from the noble Lords, Lord Boston and Lord Wigoder, will be much appreciated by all those who are concerned. The noble Lord, Lord Boston, asked me a specific question: whether everything possible was being done to keep the public informed and to take all the possible precautions? My answer is, yes, I believe that everything possible is being done; but let us remain vigilant and take nothing for granted. So far as the closing words of both noble Lords are concerned, the Government agree that the people who perpetrated this and the two previous acts are criminals and everything possible will be done to bring them to justice.
Lord Shinwell: My Lords, is the Minister aware that the expressions of sympathy for the several persons involved in this deplorable affair would be applauded by every Member of your Lordships' House and by a very large body of people outside? But expressions of sympathy, while desirable in the circumstances, to me do not seem to be enough. I should like to ask the Minister a question that may not have been put in the course of debates dealing with Northern Ireland, and it is this. How long is this affair going on? How many years will elapse while scores of innocent people are slaughtered, and how many years will elapse while the British taxpayer is being asked to accept a burden that it is doubtful he can afford? Also, how many years will elapse while a very substantial and important element of the British forces are deployed in a task that they abhor, as do we all?
Is it not possible, in some form that hitherto has not been deployed—and I hope that this proposal will not be laughed at, because I do not laugh at this problem and neither do I think anybody here does—for the Government to appoint a commission of responsible people (and, if possible, people who are impartial, those who have studied Irish history, the depression, persecution and political implications associated with it) to create some medium, whether personal, or public, collective or individual, which will enable us to bring this deplorable and horrific business to an end? I

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know that the idea of a Royal Commission will seem futile and absurd to many Members of your Lordships' House, but not long ago a suggestion was made from the Government side of your Lordships' House that something of the nature of an advisory body might be appointed to inquire into various aspects of the problem. That proposal failed to stay the course and, so far as I know, has been rejected.
The members of the IRA—the Provisionals—have an objective. As I understand it, it is a united Ireland. That is politically unacceptable. It has been talked about for several hundred years and certainly during this century. I have heard of many of the discussions earlier than this century. But what about the other side of the coin? I make no personal or offensive criticism, but is it not possible for Mr. Ian Paisley, who is a leader of an important section in Ulster, to offer some proposal, some suggestion, which might have the effect, if not of providing a solution, of bringing the parties together for further discussion? Could we not revive the question of the sharing of power, although rejected by Mr. Paisley and his friends? All sorts of ideas might occur to members of a commission and to Members of your Lordships' House. But merely to express sympathy—however essential it is in the circumstances—is not enough.
My noble friend Lord Bruce of Donington raised an issue this afternoon that may occupy the attention of your Lordships' House for some time in the future. The Companies (No. 2) Bill has a vast array of amendments. I would rather see this House and the other place in the next few months, if necessary, devoting their attention to finding some solution to the Irish problem. Something has to be done and I think it can be done. After all, what do we ask them to do? We are asking Mr. Paisley to agree with the opponents of the other side. Mr. Paisley might consider that suggestion—however objectionable it might be to him—in the hope of providing an approach to a solution. I ask the House to forgive me for speaking in this fashion but I am sure I represent the views, hopes and the expectations and still, I hope, the optimism—of a majority in your Lordships' House.
3.53 p.m.
Lord Belstead: My Lords, the noble Lord expresses understandable concern about the scourge of terrorism and its underlying causes so far as it concerns the United Kingdom. I do not think, with respect to the noble Lord, that this is the occasion to take up the broad and important questions which the noble Lord, Lord Shinwell, has asked. I will certainly draw to the attention of my right honourable friends who are concerned the remarks which the noble Lord has made.
Lord Harris of Greenwich: My Lords, is the noble Lord aware that many of us are extremely anxious to ensure a satisfactory settlement to the Northern Ireland problem, but at the moment our principal concern is the catching and conviction of those who have committed these disgraceful offences in the city of London? Secondly, may I ask the noble Lord whether he will bear in mind that, with the death of Mr. Howorth, this is the second Metropolitan Police
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explosives officer who has died in circumstances of this kind? Thirdly, may I express our own view that the tribute which he paid to the police and which Sir Steuart Pringle paid to the other emergency services was particularly well made, if I may say so? I think it right for us to remember the debt we owe to the police, particularly at times when they are victims of so much snarling invective at other periods of the year.
Lastly, is the noble Lord aware that, although we applaud the steps which have been taken in London to increase the number of Metropolitan Police officers in central London, it is highly desirable to warn the inhabitants of other cities in this country of the risks that they run at the moment of a switch in IRA tactics to Birmingham, Manchester and other major provincial cities which have been at the receiving end of the terrorist outrages of this kind in the past?
Lord Belstead: My Lords, the Government agree with the noble Lord, Lord Harris, in his words of sympathy and admiration, and also for the word of warning with which he ended his question. The noble Lord referred particularly to the fact that this was the second tragedy of this kind concerned with Metropolitan Police officers working in this way. I think that it is right to remember—as I think the noble Lord was remembering as he spoke—that Mr. Howorth had in fact been with the Metropolitan Police since 1974; but before then he had been an army bomb disposal man. Among other places, he had served in Northern Ireland. All who do this work are owed a debt of gratitude by us.
Lord Blease: My Lords, I wish to add my voice to the words of sympathy expressed by noble Lords in this House and so widely expressed throughout these islands concerning the tragic death of Mr. Kenneth Howorth in the course of his services in protecting the lives and property of peace-loving citizens. As the recent bombing instances have been associated in the public mind with Ireland and with the Irish people, may I as an Irishman say that I utterly deplore and condemn the methods and acts of terrorism and murder being perpetrated in Britain, in Northern Ireland and in the Republic in the name of Irish patriotism and the Irish people? I feel sure that noble Lords will be fully aware that the vast majority, the millions, of Irish people in Ulster, in the Republic and those who have made their homes here in Britain are ashamed and saddened by such vile acts, acts which seriously impair the solutions to the problems confronting the people of Ireland and add great difficulties to the hardships of the Irish people.
Lord Belstead: My Lords, the Government are grateful to the noble Lord, Lord Blease, for the lead which the noble Lord gives in the words which he speaks. It is that kind of constructive response which could help lead us out of these difficult days.
Lord Hankey: My Lords, before we leave this question, are the Government aware that an enormous number of people in this country are getting extremely concerned at the way in which these constant acts continue in Northern Ireland? It is obviously only a matter of time before it begins to spread to the main-

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land of the United Kingdom. This is going to have a very serious effect on our foreign relations. It is really bringing this country into disrepute. Will the Government consider whether it is time to proscribe the IRA, in the same way as they are proscribed in the Republic of Ireland? Is it not time that we began to take the offensive against these people? It seems to me that we are being very soft in dealing with them and there might be a good deal of support in this country for more radical measures.
Lord Belstead: My Lords, the prevention of terrorism legislation, which of course is on the statute book, is the answer to the noble Lord's question. Incidentally, it may be a sad reflection that there are today some 69 IRA prisoners in English gaols.
Baroness Hornsby-Smith: My Lords, can my noble friend give us any information on the widespread reports in the press that these terrorists are being trained in the Lebanon by the PLO? In view of the fact that we have seen similar incidents in Brussels, Holland and Belgium, where similar claims have been made, can he tell us whether we have any confirmation of this and what steps Her Majesty's Government propose to take?
Lord Belstead: My Lords, as I said to the noble Lord, Lord Hankey, the prevention of terrorism legislation is on the statute book. This is a piece of legislation which allows us to keep close watch on people who come and go, and that we will continue to do.
The Earl of Onslow: My Lords, the Prevention of Terrorism Act is on the statute book, as also is the Treason Act. Are not people who are born subjects of the Crown and who then try to disturb other people's loyalty to the Crown by blowing things up guilty of treason?
Lord Belstead: My Lords, I think we are now really getting so wide that we are starting a debate. If your Lordships will excuse me, I think I will simply come back to the point at which we started. The point is to capture the criminals who have perpetrated this act; then the courts will deal with them.
Earl Ferrers: My Lords, with that thought, I suggest that we return to the original subject we were discussing.

Companies (No. 2) Bill [H.L.]
4.1 p.m.
Debate continued on amendment to the Motion that the Commons amendments be now considered.
Lord Morris: My Lords, those noble Lords who listened with care to the remarks of the noble Lords, Lord Bruce of Donington and Lord Lloyd of Kilgerran, I humbly suggest must come to the conclusion that there is very great merit in the substance of their case. However, in my view, that substance is solely one of procedure in your Lordships' House or, rather, of the interrelated procedures of the two Houses of Parlia-
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ment. I believe that in arguing as they did they placed themselves on two prongs of Morton's fork—for they raised this question, which I would ask my noble friend to answer if possible. The question is: Does he believe that the tabling of this amendment has in any way helped your Lordships' House in the consideration of the Commons amendments by delaying further such consideration? It is for this reason I believe that the tabling of this amendment in this form at this particular time smacks of a certain technical trickery that has not helped their cause, which is of course a change in the interrelated procedures of the two Houses of Parliament. I believe that there are other ways and means in which that cause could be furthered if they feel as passionately as they apparently do.
Lord Harris of Greenwich: My Lords, I am not sure that the noble Lord, Lord Bruce of Donington, will necessarily welcome the fact that I am springing to his defence. Nevertheless, it is only right to say that I do not think that in this matter the noble Lord is guilty of trickery, even of technical trickery. It seems to me he has done no more than put down a Motion which is rather reminiscent, in the form of words used, of the very weighty complaints made by the noble Lord, Lord Carrington, when speaking as Leader of the Opposition when he delivered, in my view, a wholly well-merited rebuke to the then Labour Government for producing shoals of amendments at the last stage of the parliamentary year, and not giving this House the opportunity of debating them. I am bound to say that I sat then on the Government Front Bench and thought that the views expressed by the noble Lord, Lord Carrington, were wholly justifiable.
I say that because, that being so, I would have assumed the present Government would have gone to considerable lengths to avoid doing exactly what they complained the Labour Government had been doing. Unhappily, they are doing precisely the same thing, which is to give us no adequate time to discuss major amendments to the laws of England—to produce 240 amendments, accepting at once that some are of a technical character and no doubt will be agreed very largely on the nod, and giving this House only four days to consider them. Certainly my noble friends and I will vote with the noble Lord, Lord Bruce of Donington, as an indication of our view that this is an unreasonable way to treat this House.
All I would say to the noble Lord, Lord Bruce, is that I listened with fascination, as I think we all did, to his views on the attitude of the Labour Party to the House of Lords. If I may say so to him, I think that their view is a little more robust than would appear from the way he expressed their view. As I understand it, the one thing on which the Labour Party agree is the immediate abolition of the House of Lords, and I think it is an indication of the new unity of the Labour Party that everyone apparently agrees with the proposition. Speaking for myself and, I think, for the overwhelming majority of other people in this country, who take the view that it is highly necessary in order to safeguard the basic liberties of the people of this country that there should be a second chamber, in view of that, I think it is even more essential to ensure that the second chamber, in whatever form it exists, is treated with a great deal more respect than has been the position today.
4.6 p.m.
Lord Wedderburn of Charlton: My Lords, this amendment tabled by my noble friend to the original Motion is of very great importance. Indeed, for a Government which is devoted to free enterprise and privatisation and market forces, I would have thought company law is a matter of some seriousness. I was interested that the speech of my noble friend Lord Bruce of Donington appeared to be treated with some amusement by the Government Front Bench. I would have thought that is unfortunate, but it does perhaps characterise the situation with which we are faced. Every big Companies Bill is a re-examination of the mechanism by which business is carried on and a re-examination of the relationships of society with the enormous privileges of limited liability and incorporation which companies enjoy—far bigger privileges than any other organisations in the land. That is a matter which has to be considered by everybody. It is not just a technical matter and workers are beginning, as dole queues increase, to take a greater interest in this matter. I will come to that a little later.
The method of company law reform has changed since 1908. We used to have a committee or a commission, then a revising Bill and then consolidation legislation. In 1918, 1929, 1948, 1967 and 1976, it began to run into the ground. Now we have a new method. It is a method prompted by the EEC directives which, for good or ill, the Government are obliged to carry out. There are many European Economic Community directives on the harmonisation of company law; so most Sessions we shall have a Companies Bill.
You can do two things with a directive; you can just take it and put it on the statute book as best you can—because often it is very difficult to do it—or you can take it as an opportunity, a launching pad, for company law reform of a wider kind. In 1978 the previous Administration chose the wider course on a systematic basis. In 1979 the present Administration chose the narrower course, and then they changed their mind. There is nothing wrong with that, so long as you know what you are doing. But when they changed their mind they just put bits and pieces here and there, now and then, into the Companies Bill in 1979, and that Bill became the Act of 1980. Of course, in this Bill we are considering there are dozens of amendments to the 1980 Act, and there are now dozens of amendments to the amendments to the 1980 Act—new amendments put in on Report in another place. There are most important amendments to the 1980 Act which have never been discussed properly at all. That is the point which the noble Lord, Lord Morris, perhaps ignored, because the notice has not been adequate for the business community, the trade unions or the Houses of Parliament, where it is relevant. The notice has not been adequate of the steps which the Government wish to take.
There is an amendment to the clause dealing with what the side note calls "international bonds". Every time this Government introduce a clause with a short side note you can guarantee that it is very difficult to understand. Nobody really understands the section in the 1980 Act on international bonds—and who will understand the amendment to it which was introduced on Report on 19th October in another place, eight days ago, with precious little notice at all,
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I do not know! Indeed, the right honourable gentleman the Minister of State showed a fine sense of irony in introducing it—he hardly did more—when he said this on 19th October:
"I hope the House will accept the clause, particularly since no substantial criticism has been levelled at its substance".
Of course no substantial criticism has been levelled at it. Everyone has been doing what my noble friend and I have both been doing for the last few nights—sitting up trying to put together a paste-and-scissors version to try to understand what on earth is being done.
When one comes to look at the substance, as we can now begin to do, I immediately say with regard to my own amendments that I shall not withdraw them all, perhaps because they will cause the Government to put on the record an explanation—and this is another cause of complaint, because some of these amendments were simply put in and never explained at all at various stages of this Bill. My amendments, I now think, having had the chance to glance at them this afternoon, are not very adequate. I should like another chance to have another go, but of course that will not be possible.
If noble Lords will look at Amendment No. 169 on the Commons amendments sheet, they will find that the 1980 Act is being amended so that arrangements with directors in regard to assets which the directors may take from the company, and substantial arrangements of that kind, are being altered in a most fundamental way. That was introduced on Report on 20th October, at column 243 of the Official Report, and there was no explanation, no debate—nothing. By Amendment No. 170, the policy of the 1980 Act is reversed. At least, this was introduced on 7th July in Committee, but there has been no clear explanation. Amendment No. 194 was introduced on Report on 20th October, one week ago, and it amends the first schedule to allow companies to keep secret matters which, up to now, one would have thought it was pretty obvious they should disclose, such as the previous year's result on certain matters.
There are dozens of these clauses which have never been properly debated. This Bill left this House with 79 clauses on 131 pages and comes back with 106 clauses on 165 pages, and some noble Lords—perhaps the noble Lord, Lord Morris—may feel that that is what happens in the run of the mill knock-about of parliamentary life. But it is not at all like that. The existing clauses have been changed in a fundamental way and dozens of amendments have been made at a very late stage. One might have thought that the Government would have learned something from what they had to do to the 1980 Act in this Bill, but they have not. We all know that this Government are not for learning!
There are dozens of ways in which company law cries out for rationalisation, which could have been done and which—I say this in all frankness to the Ministers who are to speak—could still be done. There is no reason why this Government could not take back a shambles of a Bill and introduce it in the next Session, after two months' consultation, find the parliamentary time which the noble Lord, Lord Lyell, seems to think he could not possibly find and put it through quite

921
quickly before Christmas, if they did it systematically.
Noble Lords who were present during the debates on the Bill on company law will know that I have had a special interest in the section which prohibits a company from giving financial assistance for the purchase of its own shares. The noble Earl, Lord Selkirk, with whom I was in communication and who regrets that he cannot attend your Lordships' House because he is unwell, also joined with me on 30th April to show to the Government that—which they then accepted—their proposed replacement for the section prohibiting such assistance, which since the Green Committee of 1929 has been accepted as being an improper use of company funds, was quite inadequate.
The Government took their version away and came back to another place on 30th June with a totally new version—not just a new set of words, but a new philosophy. They then took that away from Committee in another place and came back on Report on 20th October on one of the most fundamental issues of company law of our time, in terms of financial fiddlers as well as in terms of the innocent who suffer. The noble Earl, Lord Selkirk, and I joined forces about that, because the section was unkind to the innocent and too kind to the guilty. The noble Earl was more interested in the first and I was more interested in the second. He has won, because this clause is so kind that both the innocent and the guilty need have no fear whatsoever, however much fiddling of this kind goes on.
If noble Lords are going to jump through the hoop in the kind of way which is suggested by three different clauses, with three different philosophies, the last on 20th October, and are not going to issue a bleat, what do they think they are doing here? My noble friend Lord Bruce is quite right. If this House lets this go through with a few discussions on amendments dreamed up by my noble friend and myself at 2.30 in the morning which, no doubt, will be criticised for their drafting, if the Government have such effrontery, then perhaps we shall go through the charade of a pantomime, of which my right honourable friend Mr. Stanley Clinton-Davis complained in another place, and he was right. It is a pantomime.
May I give one other instance to the House, because it is important to give concrete instances? We are not just talking about matters of terminology, amendment or interpretation. The Government appear to be prepared to put on to the statute book a clause which they themselves have said is a matter of doubt and uncertainty. Let me explain in a few sentences what I mean. The Government are enacting legislation on concert parties. They produced draft clauses on concert parties on 28th May and they asked for comments on 15th June. Everyone with any knowledge of the subject agreed with the new journal The Company Lawyer, which is rapidly acquiring some authority, when it wrote on that suggestion:
"The Government has tabled 21 new clauses to the Companies Bill at committee stage in the House of Commons after the Department of Trade, in a hastily assembled consultative document, allowed a mere 18 days for comment by any interested parties".
That is a comment that one can find in many other
922
pages of the journal during this year, where the period for consultaton is said to be absurd.
I wish to make it clear, because this may be misrepresented, that I do not wish to attack those who carry out the difficult work of the Department of Trade. I say that this comes from the Government, because the Government do not know what they want to do and, when the Government decide what they want to do, they are so devious in these matters that it is very difficult for their advisers to know how to do it.
This clause was Clause J in the consultative document, and what did the consultative document say about Clause J? It said that there was uncertainty whether the clause,
"would include all beneficial interests, such as an interest under a trust of income from shares".
That is quite an important point. It went on:
"If there is such a doubt, the Department is uncertain whether such arrangements are likely to be a source of difficulty in practice".
That is an important matter for consultaton.
But between 28th May and today, we have had no change in the clause. Your Lordships are asked to approve it as it stands, and we have not had any explanation from Government spokesmen about whether the difficulty has disappeared, whether there is still uncertainty or what it all means. So that on their own documents they are asking this House to enact what today they may care to explain. But if they do not, this House should take another look.
I am told that it was asked through the usual channels whether this House would sit until after 8.30 p.m. on this Bill. But it would take until half past 8th November to discuss properly the kind of amendments which are put in the 246 which are listed. I ask the Government whether or not they intend to consider accepting any amendment in these proceedings. Unless they say "yes", your Lordships may as well pack up and go home after voting for this amendment, and having the courage to show the Government what should be shown to them.
4.18 p.m.
Lord Boyd-Carpenter: My Lords, although I shall not support the amendment moved by the noble Lord, Lord Bruce of Donington, which seems to me to be a pointless exercise, and although I shall not follow the example of the noble Lord who has just sat down and make several speeches which were, perhaps, more relevant to the amendments when we come to them, I think it is right that there should be, at any rate, one voice from this side of the House on the procedure which Her Majesty's Government have seen fit to adopt in respect of these amendments.
The substance of what is happening this afternoon is that your Lordships are being asked to rubber-stamp 246 amendments which were made in another place. That makes something of a mockery, does it not, of the revising function of this House? I must express my regret that it is a Conservative Government which seeks to do this to this House and, I am afraid, to set yet another precedent which another Government of another colour may well exploit in

923
the future. It is a very great pity that we should be conducting this important discussion in this way.
As I said, I see no point in tagging on to the Motion some words which may ease the feelings of some noble Lords who feel as they do, and as I do, about this, but which do not at all affect the procedure. But I think one can ask of my noble friends on the Front Bench two things which, with very great respect, I put to them. First, I think that they owe this House an apology for the procedure and I hope that they will be prepared to express it. Secondly, I hope that they will be prepared to express in even stronger terms the views which many of us feel, and which I suspect my noble friends on the Front Bench also feel, about the conduct of business by the business managers in another place which has produced this situation. If there is anything said this afternoon which can strengthen their hands, I hope it will have that effect.
We have had occasion more than once during this Session to find this House badly treated—not by our own Leaders and Chief Whip, who, if I may say so without impertinence, have always tried to serve this House to the full, but by the business managers in another place. This is certainly the worst example. Although I appreciate that decorum and tact will prevent my noble friend from indicating in a few moments from now what it is he proposes to say to his right honourable friends in another place, I hope he will let just a bit of his feelings and the expressions he has in mind to peep through.
Lord Campbell of Alloway: My Lords, I wonder whether your Lordships will allow me a very brief intervention. My noble friend Lord Boyd-Carpenter has in fact said everything that I would have wished to say to your Lordships, save this: that this is a serious procedural defect. It is a serious and substantial defect in the machinery of law-making in a bicameral system of government. Whether it happens, as it does here, by accident of our friends or, as it might in other circumstances, by design of our enemies, it denigrates the system of bicameral government. Finally, may I say that I would have supported this amendment wholeheartedly but for the inclusion of the last few words which for me to adopt would imply a degree of hubris which I am not prepared to indulge in.
Lord Elwyn-Jones: My Lords, I venture to support what has been said from this side of the House and, indeed, the other side in condemnation of the shoddy way in which this House has been treated by the business managers in another place, upon whom I quite agree the responsibility must certainly rest. It is no fault of the Chief Whip, who has the unpleasant task once more of having to hold the baby, or the buck, or whatever the appropriate object might be. Here is a situation where we are asked to consider a series of amendments —246 of them—which saw the light of day last Friday, containing 43 new clauses. This is an astonishing reversal of the revisionary role of the House of Lords. Apparently that role has gone over to another place. The Government had the responsibility of bringing forward the Bill. We had been promised this Bill. Sometime early last year I think we were promised that we should have something of this kind. We had a
924
short interim Companies Bill because effect had to be given to the conventions of the Communities. But here we are faced with this grotesque situation in which the revising function has been taken over by another place and has been done extremely badly. If I may say so, they have not got the facilities. Least of all have they the know-how that this House has in matters of this kind.
My noble friends have identified in detail some of the matters of complaint. So has the noble Lord, Lord Lloyd of Kilgerran. The latter and my noble friend, who is a great expert in this field of company law, identified not only the incomprehensibility of many of the amendments but their sheer unsuitability. I think the word "diabolical" was an adjective which was used by the noble Lord, Lord Lloyd of Kilgerran, who, admittedly, occasionally is given to exaggeration but apparently not on this occasion.
We can blame the Devil for an awful lot of things but the responsibility here is more clearly establishable without calling in the assistance of theology for the purpose. The responsibility is plain. I think that to have put down and, I hope, to carry this resolution will be of value, if only to teach another place that they just cannot treat us like this. The warning words of my noble friend Lord Bruce of Donington were that they are conjuring up and supporting those who have said all along, "Well, we can do without the House of Lords". If they treat the House of Lords in this contemptible way, they are breeding dangerous things for the future of this House.
Lord Lloyd of Kilgerran: My Lords, before the noble and learned Lord sits down, may I say that on this occasion it was not I who conjured up the Devil but his noble friend sitting alongside him.
Lord Elwyn-Jones: My Lords, I apologise for having visited the Devil upon the noble Lord below the gangway. I do not think my noble friend would wish to disclaim responsibility in another place for what he has temporarily inadvertently passed to the Devil himself.
Lord Denham: My Lords, until this debate started your Lordships might have been surprised that it should be I who am intervening on behalf of Her Majesty's Government during consideration of what is by common consent a complicated and highly technical Bill. My noble friend Lord Trefgarne, my noble and learned friend Lord Mackay of Clashfern and my noble friend Lord Lyell will of course be dealing with the amendments themselves when we eventually get to them.
This amendment to the Motion, That the Commons amendments be now considered, is concerned, as your Lordships will have seen by now, not so much with the details of the legislation as with parliamentary handling and management of business. For that I myself must take full responsibility. We in this House must, I think, be very careful. Some noble Lords have probably sailed a little close to the wind regarding the rules of comity between the two Houses, in that it is agreed that we do not criticise the timetables and procedures of another place. I say this in parenthesis. Speaking for Her Majesty's Govern-

925
ment, it is my responsibility, together with my noble friend the Leader of the House, to decide how business is managed in this House, and mine alone.
Let me say at the outset that I have considerable sympathy with those who would have liked more time between the final stages of this Bill when it was in another place and further consideration in your Lordships' House: more particularly between the arrival and circulation of the amendments and their discussion this afternoon. It cannot be denied that a number of provisions, some of them technical but others of no little significance, were added to this Bill in another place only last week. I say this openly and categorically. I can assure the House that I and my colleagues would not wish to belittle the practical difficulties under which your Lordships have to work on this occasion.
However, as I shall seek to show, the picture is not perhaps quite so cut and dried or indeed so bleak as the noble Lord, Lord Bruce of Donington, and other noble Lords have suggested. I am not going to disappoint the noble Lord, Lord Bruce of Donington, when I use one of the arguments that I think he suggested that I might: that the bulk of the significant changes in another place, including the new clauses on disclosure of interest in shares, have been in the public domain since early July. The Bill was reprinted in another place as amended by Standing Committee on 9th July, and some 150 of the 246 amendments made by another place were already reflected in this print of the Bill. In addition, the great bulk of the amendments made on Report in another place were available in print well in advance of last week. Most of them were tabled by 8th October. I think we have already heard from what the noble Lord, Lord Wedderburn, said, that he, for one, seems to have done quite a large amount of research on what was happening while it was happening in another place. Of course I accept that nothing can fully compensate for the properly printed and marshalled list of amendments, but there was certainly nothing to stop Members of this House from reflecting upon and seeking advice on a good number of the issues in the period since July.
Of the 256 amendments, 153 are consequential. Of the remaining 103 amendments, I am advised that 50 are technical, drafting or minor and, of the remaining 53 amendments which are substantive, about 20 are in response to pressure either from this House or from outside bodies. I say this just to put the matter a little more in perspective, in that there are not, as your Lordships will appreciate, 246 substantive points.
Many of the changes are technical, and technical amendments, particularly in the second House—which on the present occasion happened to be another place—are inevitable in a complex Bill such as this. While on this point I really must say to the noble and learned Lord, Lord Elwyn-Jones, that he surely realises that some Bills start in your Lordships' House, some Bills start in another place and, on the occasions when Bills start in this House, another place is to a certain extent, as with regard to this particular Bill, the revising Chamber. So I do not think that there is anything new or anything incongruous in what he suggested on this.
My Lords, I am bound to say that both these and many of the more significant changes reflect concern
926
expressed in this House earlier this year. I would remind your Lordships of the remark made by the noble Lord, Lord Ponsonby of Shulbrede, at the Second Reading of the Bill in your Lordships' House. He said:
"The Bill is notable for the absence of clauses on matters on which legislation is needed".
It was in response to your Lordships that we agreed to deal with disclosure. I recall the noble Lord, Lord Mishcon, on Second Reading urging us not to "duck" this issue but to have the courage to come forward with proposals. Well, we have had that courage and our proposals represent one-third of the volume of the amendments before us today. The noble Lord, Lord Bruce, pressed us to take account of proposals made by a working group of the CBI, the Law Society and the accountancy bodies on Section 56 of the1948 Act. We did, and hence another batch of the amendments. We were pressed hard to strengthen Part II of the Bill. My Lords, we have. Of course it is always possible to blame any Government for lack of time, but I had hoped to hear at least a word of congratulation for our prodigious efforts to meet points raised here, in another place, and by the main professional bodies.
Lord Harris of Greenwich: My Lords, may I ask the noble Lord one question? Let me say at the outset that I am quite sure the Government, in meeting some of these points, have done extremely well and I am sure we shall all be delighted about that. But that is not the point. The point is, why have over 200 amendments, albeit some of them are of a technical character, been produced 48 hours before the end of this parliamentary Session? That is the issue.
Lord Denham: My Lords, I shall be coming to that point later and I am afraid in spite of what the noble Lord, Lord Bruce of Donington, said, I shall be quoting precedents for this.
Lord Harris of Greenwich: But the noble Lord complained of the time. That is the point.
Lord Denham: My Lords, I shall come to that point later. The noble Lord, Lord Bruce, mentioned at one point in his speech—and the noble and learned Lord, Lord Elwyn-Jones, has commented on this—that some of the amendments were "diabolical". I know that the noble Lord, Lord Lloyd of Kilgerran, seems to disassociate himself from that remark; or whether he is merely modestly disallowing the originality of it, I am not quite sure.
Lord Elwyn-Jones: My Lords, I think the noble Lord, Lord Lloyd of Kilgerran, was disassociating himself from being given the paternity of the adjective which in fact belonged to my noble friend Lord Bruce of Donington, otherwise I think he agreed with it.
Lord Denham: My Lords, I am not surprised that the noble Lord would wish to disassociate himself from paternity because in this case it seems to me to be rather a doubtful child. I am advised that the Consultative Committee of Accountancy Bodies has been consulted all the way along by Her Majesty's Govern-

927
ment I am advised that the Law Society have been consulted all along by Her Majesty's Government, and I am advised that both these bodies indicated that there were no matters on which they would make representations at this stage.
Lord Bruce of Donington: My Lords, I am greatly obliged to the noble Lord for giving way. Would he inform the House of the date of the last occasion on which the representatives of the CCAB met his officers from his department?
Lord Denham: No, my Lords, I am afraid I will not because I do not happen to have the information to hand; but I will certainly find out that information and let the noble Lord know.
The business managers of successive Administrations in this House have suffered from congestion of business and, quite rightly in my opinion, they have not got a guillotine procedure, they have not got a Committee off the Floor of the House, they have not got the selection of amendments by the Speaker or some other body equivalent in this House, and they have not got the closure in order to control this business. This means that on occasion log-jams do occur. The quite exceptional log-jam of the two Sessions 1974–1975 and 1975–1976, for instance, led to the House laying down recommended minimum intervals between stages —minimum intervals, incidentally, which in this Session we have had no small success in endeavouring to maintain.
Lord Oram: My Lords, in those instances was it not the case that the Bills then being dealt with were controversial as between the parties, whereas in this case everyone seems to agree that this is a technical Bill?
Lord Denham: My Lords, I do not see that that necessarily makes the thing better or worse. We now have minimum intervals between the stages. We do not in fact have any laid-down procedure as to a minimum interval between receiving amendments back from another place and discussing them.
But, my Lords, noble Lords opposite, when they are accusing us of behaving badly over this, really cannot say that we must totally forget everything that they did in the past. With particular regard to Commons amendments, in 1975 the House began consideration of 300 amendments to the Children Bill only three days after their arrival from the Commons. In 1977 no fewer than 252 Commons amendments to the Patents Bill were agreed to by this House less than two days after their arrival. My Lords, I will repeat those last figures: 250 amendments to the Patents Bill—and as the noble Lord, Lord Lloyd of Kilgerran, will agree, patent law is not noted for being the simplest branch of English law—received from the Commons and agreed to by your Lordships' House during the last Government of the party of which the noble Lord, Lord Bruce, is a Member, within two days. I have no record as to whether the noble Lord, Lord Bruce, was present on that occasion.
Lord Bruce of Donington: My Lords, for the sake of
928
accuracy, will the noble Lord say whether those two days were inclusive of Saturday and Sunday, or were they just two working days?
Lord Denham: My Lords, I understand they were just two straight calendar days, if you can have calendar days. The noble Lord, Lord Bruce, says that had he been present he would have objected to such treatment. I must tell the noble Lord this, that speaking as he has been doing this afternoon—and I feel your Lordships will be very glad of this point—from the Opposition Dispatch Box, he has committed the party of which he is a member never again, when they are in power again, to inflict anything like such a task as on that occasion, indeed as on this occasion, on this House. Perhaps the House will appreciate this commitment. I hope the House will never have cause to remember it.
My Lords, these examples cannot undo what has been done in the present case; nor do they make the programme any more acceptable to the House. But they do point out that this is a perennial problem and one on which the present Government's record, thanks partly, it is true, to the minimum intervals I have referred to, is no worse, and I would say a good deal better, than that of the previous Administration. As the House will know, I readily agreed to look at the week's business after the noble Lord, Lord Bruce, first raised his complaint last Thursday. As a result this House may wish to continue consideration of the amendments tomorrow. I can give the House an assurance that I have taken note of what has been said from all parts of the House and I will specifically raise the points with my colleagues in another place. I will do all that I can to ensure that the House is not faced with a repetition of this difficulty at the end of next Session, or indeed at any time in the parliamentary year. But having said that, I really do question whether taking into consideration all the circumstances, both past and present, an amendment in the terms such as those proposed by the noble Lord, Lord Bruce of Donington, is justified in the best traditions of the House or indeed in the best interests of the House, and I would ask your Lordships to reject it.
4.42 p.m.
Lord Bruce of Donington: My Lords, I am most grateful for the intervention of noble Lords who have spoken in this debate and I am particularly grateful for the support that appears to have come from all sides. I was particularly grateful for the brief summary of the noble Lord, Lord Boyd-Carpenter, who said quite correctly—he encapsulated the whole procedure—that it was being demanded of the House that it rubber-stamped the position as it came to your Lordships' House from the Commons. This is a perfectly accurate summary of the situation in which the House finds itself.
I am sorry that the noble Lord, Lord Morris, seemed to think that there was some deep party motive or plot behind my putting down this amendment. It was indeed the result of a good deal of personal exasperation that a situation could have arisen where it was quite impossible within the time limits defined to do justice to the Bill, for ourselves as an Opposition

929
or for the House as a whole to be able to perform its functions properly. This is the sole reason for putting down this amendment.
The noble Lord, Lord Denham, agreed eventually that it was all a question of time. That did not, of course, prevent him from enlarging on a whole series of other matters not in any way connected with the amendment itself. He expressed some regret that the Government are not being congratulated on responding to so many suggestions that came from your Lordships' House and from the Opposition. I would have thought that was more appropriate to the later stages, when one is considering the amendments in detail. But I will give the noble Lord the congratulations in advance. We congratulate the Government and we appreciate the fact that the Government have responded to the views expressed in your Lordships' House and to some of the views expressed by the Opposition in another place.
But still that is quite immaterial to the amendment on the Order Paper, which deals purely with the question of time. I take into account the observations which the noble Lord has made concerning the undesirability of casting any adverse reflection on the other place as another place. I entirely share that view and I trust that nothing I have said today will be interpreted in that sense. But it would have been quite easy for the Government so to have arranged the affairs of another place as to tack another couple of days onto its Session, which terminated at the end of July, in order to take the Report stage of this particular Bill. There would still have been 10 days before the arrival of the Glorious Twelfth; two days would not have been an undue affliction upon Members of another place. Your Lordships will recall that we ourselves in this House came back a fortnight before our colleagues in another place. That period was really all that was necessary.
My Lords, I have only one thing more to say, apart from thanking noble Lords who have taken part, and that is with regard to the position of the Consultative Committee of Accountancy Bodies. I trust the noble Lord was not seeking to infer that the CCAB were in agreement with the content and the form of the 43 new clauses that have been brought before your Lordships, because I think that would be unfair. It would be just as unfair as it would be if I were to say to your Lordships that they are in dissent with the 43 clauses. I think they ought to be absolved from that responsibility.
Lord Denham: My Lords, if I may intervene, I was making this point in regard to the fact that the noble Lord, Lord Bruce, was saying that some professional body outside had said that all these amendments were diabolical. He has not named the professional body, but I do not think the particular professional body we are discussing can have said that.
Lord Bruce of Donington: My Lords, I am grateful to be allowed to clear up the position about the word "diabolical". I did not say—and the record will show this—that a professional body said that. What I did say was that I had been in conversation with a member of one of the bodies to whom these matters had been referred, that I had received a telephone call
930
late yesterday in response to my urgent request, saying that he had been through them as carefully as he could over the weekend and that in his view some of them were diabolical. I should like to clear up that point.
My Lords, the amendment, as I have indicated, does not prevent discussion of the Bill, and therefore does not prevent this House from going through the remaining constitutional processes which have been described so succinctly by the noble Lord, Lord Boyd-Carpenter, as a rubber stamp. But it does seek to express a view, it does seek to deplore a position, it does seek to express regret. I do not see that any Member of this House who believes in the correct performance of the functions of this House can resist it. I commend the amendment to your Lordships' support.
The Deputy Speaker (Baroness Wootton of Abinger): My Lords, the original Question was, That the Commons amendments be now considered, since when an amendment has been moved in the terms set out on the Order Paper. The Question, therefore, I have to put to the House is, That this amendment be agreed to?
4.50 p.m.
On Question, Whether the said amendment shall be agreed to?
Their Lordships divided: Contents, 80; Not-Contents, 119.

DIVISION NO. 1

CONTENTS

Ailesbury, M.

Kilmarnock, L.

Airedale, L.

Kirkhill, L.

Ampthill, L.

Leatherland, L.

Ardwick, L.

Lloyd of Kilgerran, L.

Aylestone, L.

Lovell-Davis, L.

Bacon, B.

Mais, L.

Banks, L.

Masham of Ilton, B.

Beswick, L.

Molloy, L.

Bishopston, L. [Teller.]

Northfield, L.

Blease, L.

Ogmore, L.

Blyton, L.

Oram, L.

Boston of Faversham, L.

Paget of Northampton, L.

Brooks of Tremorfa, L.

Pargiter, L.

Bruce of Donington, L.

Peart, L.

Byers, L.

Pitt of Hampstead, L.

Collison, L.

Ponsonby of Shulbrede, L. [Teller.]

Cooper of Stockton Heath, L.

Crowther-Hunt, L.

Roberthall, L.

Davies of Leek, L.

Rochester, L.

Davies of Penrhys, L.

Ross of Marnock, L.

Denington, B.

Scanlon, L.

Elwyn-Jones, L.

Segal, L.

Ewart-Biggs, B.

Shinwell, L.

Foot, L.

Simon, V.

Gaitskell, B.

Somers, L.

Gladwyn, L.

Stewart of Alvechurch, B.

Glenamara, L.

Stewart of Fulham, L.

Granville of Eye, L.

Stone, L.

Gregson, L.

Strabolgi, L.

Hale, L.

Taylor of Mansfield, L.

Hankey, L.

Underhill, L.

Hanworth, V.

Wallace of Coslany, L.

Harris of Greenwich, L.

Wedderburn of Charlton, L.

Houghton of Sowerby, L.

Wells-Pestell, L.

Hunter of Newington, L.

White, B.

Irving of Dartford, L.

Wigoder, L.

Jacques, L.

Willis, L.

Jeger, B.

Wilson of Langside, L.

Jenkins of Putney, L.

Wilson of Radcliffe, L.

John-Mackie, L.

Wynne-Jones, L.

Kennet, L.

931

NOT-CONTENTS

Airey of Abingdon, B.

Hornsby-Smith, B.

Aldington, L.

Hylton-Foster, B.

Auckland, L.

Ilchester, E

Avon, E.

Inglewood, L.

Balerno, L.

Kilmany, L.

Balfour of Inchrye, L.

Kitchener, E.

Belhaven and Stenton, L.

Lane Fox, B.

Bellwin, L.

Long, V.

Beloff, L.

Lyell, L.

Belstead, L.

McAlpine of Moffat, L.

Bessborough, E.

Mackay of Clashfern, L.

Boyd-Carpenter, L.

Macleod of Borve, B.

Caccia, L.

Malmesbury, E.

Campbell of Alloway, L.

Mancroft, L.

Campbell of Croy, L.

Margadale, L.

Charteris of Amisfield, L.

Marley, L.

Cockfield, L.

Marshall of Leeds, L.

Coleraine, L.

Melville, V.

Constantine of Stanmore, L.

Mersey, V.

Milverton, L.

Cottesloe, L.

Monk Bretton, L.

Craigavon, V.

Morris, L.

Craigmyle, L.

Mowbray and Stourton, L.

Craigton, L.

Murton of Lindisfarne, L.

Cranbrook, E.

Northchurch, B.

Crathorne, L.

Nunburnholme L.

Cullen of Ashbourne, L.

Orkney, E.

Daventry, V.

Orr Ewing, L.

Davidson, V.

Oxfuird, V.

de Clifford, L.

Pender L.

De Freyne, L.

Portland, D.

Denham, L. [Teller.]

Rankeillour, L.

Derwent, L.

Reigate, L.

Digby, L.

Rochdale, V.

Drumalbyn, L.

Romney, E.

Dundonald, E.

St. Aldwyn, E.

Ebbisham, L.

Saint Brides, L.

Eccles, V.

St. Davids, V.

Ellenborough, L.

Saint Oswald, L.

Elton, L.

Sandford, L.

Faithfull, B.

Sandys, L. [Teller.]

Ferrers, E.

Seebohm, L.

Fortescue, E.

Sempill, Ly.

Fraser of Kilmorack, L

Sharples, B.

Gainford, L.

Skelmersdale, L.

Gardner of Parkes, B.

Spens, L.

Garner, L.

Stamp, L.

Gisborough, L.

Stodart of Leaston, L.

Glenkinglas, L.

Strathspey, L.

Grantchester, L.

Swansea, L.

Greenway, L.

Swinfen, L.

Gridley, L.

Terrington, L.

Grimston of Westbury, L.

Thomas of Swynnerton, L.

Hailsham of St. Marylebone, L.

Trefgarne, L.

Vaux of Harrowden, L.

Hawke, L

Vivian, L.

Hayter, L

Wakefield of Kendal, L.

Henley, L.

Westbury, L.

Hill-Norton, L.

Windlesham, L.

Hives, L.

Yarborough, E.

Home of the Hirsel, L.

Resolved in the negative, and amendment disagreed to accordingly.
On Question, Motion agreed to.
4.58 p.m.

COMMONS AMENDMENT
1 Clause 1, page 3, line 20, leave out ("(within the meaning of the Companies Act 1980)").
The Lord Advocate (Lord Mackay of Clashfern): My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 1. It may be for your Lordships' convenience if we take, so far as possible, groups of amendments together which have the same subject matter and I would propose, along
932
with Amendment No. 1, to speak to Amendments Nos. 160, 161, 173, 210 and 239.
As a result of discussions in another place the Government have examined very carefully both the effectiveness of the powers to disqualify persons from the management of companies and the availability of information about a director's business career. Your Lordships will recall that Clause 63 already contains measures which will strengthen the existing provisions on disqualification. For example, the clause will enable an application for a disqualification order on grounds of a conviction for an indictable offence committed in connection with the management of a company or because of a history of default in making returns to the Registrar of Companies, to be made to a court of summary jurisdiction. This new procedure should avoid the present time-consuming and costly processes. While we are preparing to make a number of improvements to Clause 63 which we shall consider in due course, we also propose to make parallel improvements to Section 9 of the Insolvency Act 1976 as well as to require details of a director's past directorships to be available for public inspection.
Amendment No. 1 is a paving amendment for Amendments Nos. 161 and 210, the former of which will require companies to keep details of past directorships held by their directors in addition to the details of other current directorships which they are at present required to keep by virtue of Section 200 of the Companies Act 1948. The purpose of the clause is to enable interested parties—whether conducting business with a company or considering investment in it—to be able to ascertain details of the past record of any of its directors. Such details may be inspected either in the register of directors which the company is required to keep at its registered office or on the company's file which is help in Companies House. It will thus be possible in future to obtain a list of all companies of which a person had been a director in the past five years (other than its holding company or any wholly-owned subsidiary in the same group, and dormant companies) and then to inquire as to the success—or otherwise—of those companies.
We believe that this new facility to help creditors and potential creditors will assist them better to assess the trustworthiness of directors, but without involving the obvious disadvantage of calling for extra returns to the registrar as opposed to some expansion of existing returns. The beauty of the scheme is that the new requirement has been tailored to fit into the existing returns of directors which companies are already required to make to the registrar. Amendments Nos. 173, 210 and 239 are consequential upon this amendment.
I turn to Amendment No. 160, which was in fact brought forward by the Opposition in the other place and which the Government were happy to accept. This amendment will most usefully strengthen the provisions of Section 9 of the Insolvency Act 1976. That section enables a disqualification order to be made where, in circumstances where a director has been involved in at least two insolvencies within five years, the court considers that his conduct makes him unfit to be concerned in the management of a company. The improvements which will be made consist principally of an extension of the maximum period of dis-

933
qualification for such conduct to 15 years, and of a widening of the coverage of a disqualification order to include all the stages in the life of a company; namely, its promotion, formation, receivership and liquidation, as well as its management. These improvements, therefore, will bring the section into line with the improvements already being made, by means of Clause 63 of the Bill, to Section 188 of the Companies Act 1948. Therefore, I recommend them to the House. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
Lord Bruce of Donington: My Lords, I follow what the noble and learned Lord has said in this matter. I have not had time to consider the implications of these amendments in detail. On the face of it—and I commit myself no further—it appears that Amendments Nos.160, 161 and the associated amendments are acceptable. Owing to lack of time, I am not prepared to make any further definitive observations upon them.
On Question, Motion agreed to.

COMMONS AMENDMENT
2 Clause 13, page 23, line 14, leave out ("that year") and insert ("the financial year ending with the balance sheet date").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their amendment. This is a minor, clarifying amendment. It seeks to clarify various issues that are concerned with Section 157 of the 1948 Act, as amended by Clause 13 of the Bill before us today. I see that the noble Lord, Lord Bruce, is indicating assent. The one section and the clause refer to the directors' report. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
3 Clause 16, page 25, line 37, leave out from beginning to ("paragraphs") in line 38.
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their amendment. I hope that it will be for the convenience of the House if I speak also to Amendment No. 233. The first amendment on the Marshalled List to Clause 16 is designed to reinstate a minor deletion which was made in your Lordships' House by Clause 16 to Section 16(1) of the Companies Act 1967. The second amendment, Amendment No. 233, in Schedule 4 to the Bill is merely a consequential amendment. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
4 Clause 21, page 28, line 35, leave out from ("Expressions' ) to ("shall") in line 36 and insert ("which, when used in Schedule 8 to the 1948 Act, fall to be construed in accordance with any provision of Part VI of that Schedule").
Lord Lyell: My Lords, I beg to move that this
934
House doth agree with the Commons in their amendment. This is a minor, clarifying amendment. It deals with the interpretation clause—paragraph 90 of Schedule 1. It refers to references to Clause 21. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
5 Clause 22, page 29, leave out from first ("Act") to ("by").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their amendment. I hope that it will be for the convenience of your Lordships' House if, with this amendment, I speak also to Amendments Nos. 6, 11 and 13. The term, "re-registration", has been used in this Bill, but it is now considered that this particular term is not correct, certainly in the context of the first amendment. It had been considered that a change of name by a company would constitute what we call a "re-registration", but opinion has now been expressed that the term should be limited in use to those companies re-registering under Part I of the Companies Act 1980.
A change of name by a company is provided for under Clause 24 of the Bill, and has no other effect, unlike a re-registration under the 1980 Act, which involves consequences such as restrictions on membership and also disclosure as to accounts, as well as various other matters. In order to avoid any ambiguity concerning these terms, we have amended the phraseology. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
Lord Bruce of Donington: My Lords, we are glad that the noble Lord has cleared up this point. He will recall that the matter was raised here during the Committee stage and that some of us ventured to express some doubts as to the eternal non-fallibility of the parliamentary draftsmen, saying that perhaps some further thought could be given to this matter. We are very glad that the Government have done so, and entirely support the amendment and the consequential ones.
On Question, Motion agreed to.

COMMONS AMENDMENT
5A Clause 22, Page 29, line 30, leave out ("on") and insert ("in").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their amendment. The House will see that this is a fairly simple amendment. It is entirely for the sake of consistency that the clause has been amended to read:
"a name appearing in the index".
With the plethora of lawyers that surround both the noble Lord, Lord Bruce, and myself, we hope that this is clearer, and for that reason I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
6 Clause 22, page 29, line 39, leave out from ("be") to ("by") and insert ("registered under the 1948 Act").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their amendment. I spoke to this amendment when I dealt with Amendment No. 5. It is consequential. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
7 Clause 22, page 30, line 16, at end insert ("where they appear at the end of the name").
8 Clause 22, page 30, line 18, after second ("letters") insert ("accents").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 7 and 8. These two amendments are minor drafting amendments. Clause 22(3) specifies items to be disregarded for the purpose of determining whether or not a new company name is the same as a name which is already on the index. Amendment No. 7 requires the Secretary of State to disregard not only the words and expressions specified in Clause 22(3)(b), but also the abbreviations of the expressions which appear in paragraph (b). Amendment No. 8 requires accents also to be disregarded, together with punctuation marks and other such distinguishing marks which are already specified in Clause 22(3)(d). This takes account particularly of the number of companies which are now being registered in Great Britain with what we call foreign names.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
9 Clause 23, page 30, line 34, at end insert ("or the Industrial and Provident Societies Act (Northern Ireland) 1969.").
10 Clause 23, page 30, line 42, after ("body"), insert ("except any within subsection (1)(a) or (b) above").
Lord Lyell: My Lords, I hope it might be for the convenience of the House if I speak to Amendments Nos. 9 and 10, and I understand I might be able to move them en bloc. Both of these amendments relate to the classes of the bodies whose names are to form the statutory index to be kept by the Registrar of Companies. The first amendment, No. 9, by requiring the inclusion of societies registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, will allow such bodies to be shown in the same way as those registered in Great Britain under the Industrial and Provident Societies Act 1965. This particular inclusion was agreed in another place in Committee and it is included in Clause 23(1)(b).
This particular amendment will enable account to be taken of the names of such bodies as well as companies within the meaning of the Companies Act (Northern Ireland) 1960 when considering the registration of companies in Great Britain. Amendment No. 10 honours an undertaking given in Committee in another place to amend the power given to the Secretary of State by Clause 23(3) to vary by order the
936
classes of body whose names will form the index to be kept by the registrar under that clause. What we would call 1948 Act companies and overseas companies—in other words, companies which have complied with Section 407 of the 1948 Act—will form the major part of the index, and it is considered inappropriate that the Secretary of State should have power to delete from the index such classes of bodies. I beg to move that this House doth agree with the Commons in their Amendments Nos. 9 and 10.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
11 Clause 24, page 31, line 5, leave out from ("has") to ("by") in line 7 and insert ("been registered on or after the appointed clay").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 11, which is consequential. I have spoken to it.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.
5.13 p.m.

COMMONS AMENDMENT
12 Clause 24, page 31, line 8, after ("as") (insert ("or, in the opinion of the Secretary of State, too like").
Lord Trefgarne: My Lords, I fear it will be necessary for me to speak at a little greater length on this amendment, as it is an important one. This amendment, and the ones associated with it, have been introduced to allow the Secretary of State to direct a company to change its name if that name is, in his opinion, too like that of a body already appearing on the index. I would remind your Lordships of our previous discussions on this question, both at the Committee and Report stages of this Bill, and at Third Reading. The noble Lord, Lord Mishcon, and others, including the noble Lord, Lord Lloyd of Kilgerran had pressed that powers should be retained to protect existing companies against the commercial consequence of the subsequent registration of other companies by names which were too like their own, and had proposed a number of amendments designed to achieve such protection.
Although the Government maintained their view that they could no longer exercise the subjective executive judgment which had previously been applied to all applicators in order to eliminate those which might conflict with existing companies, they accepted that a case had been made out for residual powers to deal with the problem. To this end a consultative document was prepared suggesting alternative methods of dealing with this problem. These alternatives were: (a) a requirement for the advertisement of any proposed company name in the London or Edinburgh Gazettes 21 days before application was made for its registration so that the Secretary of State might take account of any objection received before a certificate was issued; (b) a provision for a change of name to be directed within 12 months following registration, if a name was considered to be "too like". The document was

937
subsequently distributed to some 24 organisations including the Law Society, the Institute of Chartered Secretaries and Administrators, the Confederation of British Industry, the Consultative Committee of Accountancy Bodies, and the Association of Company Registration Agents. Given the two alternatives, the overwhelming majority of the response preferred the second.
The pre-registration proposals attracted little support, on the grounds that they would cause delays and more expense in the registration of companies, and create an unwarranted burden on the smaller companies in finding resources for a regular perusal of advertisements in the London and Edinburgh Gazettes. Difficulties were also envisaged in searching for names during holiday periods or due to administrative failures such as late or mis-delivery of the Gazettes. The time limit of 21 days for objection was also considered to be short and the point was stressed that failure to take action at this stage would be irreparable. On the other hand, it was recognised that the post-registration proposals would allow a considerably longer period of 12 months for objections to be lodged.
A number of organisations urged that the time limit for the exercise of the power of direction should be extended or abolished. The reasons advanced were that a company might be formed with a "too like" name but, by chance or deliberate intent, might not start trading for some time after incorporation and that, by the time the existing company became aware of the danger, it would be too late to take action. However, although the sense of this argument was recognised, it was also felt that a newly-formed company should not be left in lengthy or indefinite doubt as to its right to its name. Moreover, the general availability of the index, and the commercial "name watching" services based upon it which have been developed in recent months, provide means for existing companies to protect their interests. On balance, therefore, it was felt that the 12-month limit should be maintained. The key factor in this amendment is, of course, the definition of names which may be considered "too like". Interpretation of "too likeness" necessarily entails subjective judgment and, in consequence, cannot be enshrined in legislation. However, taking into account the arguments advanced in debate and in correspondence, not least with Lord Lloyd of Kilgerran, guidelines are being formulated against which requests for directions can be considered.
First suggestions are that a company name, including that of an overseas company registered under Part X of the Companies Act 1948, may be considered "too like" an existing name if, first, it is phonetically identical to the existing name; secondly, there is a difference of only one letter except where, in the Secretary of State's opinion, the letter makes a significant difference in the names; thirdly, in the case of oversea companies registered under Part X the only difference is by the substitution of qualifications equivalent to "Limited", et cetera, for example, "Inc", which is the American suffix, "SA" or "GmbH"; fourthly, the proposed name and an existing name have a distinctive element in common, for example, Widget Holdings Limited versus Widget Limited (in this context distinctive elements will not normally
938
include place names, personal names or everyday descriptive words in general use) and, fifthly, if the names are otherwise similar and the circumstances of the companies' operations, including location, nature of business and any other relevant factors are such as to be likely to create risk of confusion.
These guidelines, after further discussion with relevant professional organisations, will be published in the notes for guidance issued by the Registrar of Companies. They will supplement the statutory provisions and thus enable persons forming companies and their advisers to decide with reasonable certainty not only whether their proposed name will be acceptable under law, but also whether it is likely to avoid an objection from an existing body.
I hope your Lordships may accept that, while the amendments now in the Bill approach the problem in a different way from that proposed by the noble Lord, Lord Mishcon, and others, they do embody the same principle of the exercise by the Secretary of State of subjective judgment on a selective basis in respect of names which may be "too like" those of existing companies. I believe—and my view is supported by the great majority of the professional organisations we have consulted—that they will provide the safeguards which we all agree to be necessary in this area. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
Lord Ponsonby of Shulbrede: My Lords, I thank the Minister for explaining the amendment in detail and for bringing it forward. We regard this as an improvement to the Bill, as it meets some of the fears expressed in Committee and on Report, particularly by my noble friend Lord Mishcon; post-registration change of name instead of pre-registration change of name provides an element of protection. While having welcomed this proposal, we would on the whole have felt it better had the Government stuck to the present system, which allows subjective assessment of an individual name to be made on registration. Nevertheless, we regard the amendment as an improvement to the Bill.
Lord Lloyd of Kilgerran: My Lords, I support the noble Lord, Lord Ponsonby, in those remarks. I welcome this and the other amendments which contain the words "too like" because they recognise the practical fears expressed by myself and others, those who have experience of dealing with trade name matters. As for the indications we have had of what the guidelines will be, I was not too happy with what the Minister said about those; I assume they will not have statutory significance and that the Secretary of State will have a further discretion to those set out in the guidelines.
Lord Trefgarne: Yes, my Lords; the guidelines will not have statutory force, and furthermore they are still subject to some consultation. Thus, if the noble Lord still has doubts, he will be able to participate in that further consideration.
On Question, Motion agreed to.

COMMONS AMENDMENTS
13 Clause 24, page 31, line 9, leave out ("re-registration").
14 Clause 24, page 31, line 12, after ("as") insert ("or, in the opinion of the Secretary of State, too like").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment Nos. 13 and 14.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.
5.22 p.m.

COMMONS AMENDMENT
15 Clause 24, page 31, line 15, leave out from ("within") to ("period") in line 16 and insert ("such").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 15. Amendments Nos. 15 and 17 taken together strengthen the provisions of Clause 24 under which companies may be directed to change their names. As a result of discussion in Committee in another place concerning the damage that could in certain cases be caused by a company registering a name the same as or too like that of another company already on the register, or with a name which has been obtained as a result of misleading information having been given, it was considered that the Secretary of State should have powers to direct a company to change its name as soon as possible. Although the change of name must be made by special resolution of the company and will normally involve the giving of 21 days' notice of the meeting to pass the resolution, nevertheless, the proviso to Section 141 (2) of the 1948 Act makes it clear that this need not always be the case, and accordingly the Government considered there was no need to specify a minimum period for a change of name. Amendment No. 15 therefore removes the minimum period which must be given for such change to take place from six weeks to such period as the Secretary of State may specify.
Amendment No. 17 falls into two parts. One of the difficulties experienced in the administration of the 1948 Act has been that the registrar, when considering applications for named containing prestigious words, such as "British" or "trust", has had to rely primarily on the information or assurances provided and subscribed within a certain period from the date of registration, or as to the eventual membership of the board of directors. At present, once the name in question is registered, there is no means of undoing any harm which might be caused by applicants providing false or, misleading information, because the Acts do not give power to the department to enforce a change of name in such circumstances. The first part of the amendment is intended to cover this kind of situation and to prevent the continuance on the index of prestigious company names which have been gained by deception, allowing a direction to be issued in such cases within five years of registration.
Secondly, although Amendment No. 15 will require the time within which a company must comply with a direction to change its name to be varied, it does not provide for any extension of whatever time limit may have been determined in respect of a particular com-
940
pany. In practice, the company could submit a new name which is not acceptable and may thus have to hold further meetings to pass special resolutions confirming new names. The second part of Amendment No. 17 therefore allows discretion to extend the period specified in the direction in the light of circumstances arising after issue of the direction to change name. As the amendments are not consecutive, I cannot move them en bloc, so I beg to move Amendment No. 15.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
16 Clause 24, page 31, line 18, leave out from ("apply") to ("as") in line 19 and insert ("in determining for the purposes of this subsection whether a name is the same as or too like another").
17 Clause 24, page 31, line 20, at end insert—
("(2A) Where it appears to the Secretary of State that a company has provided misleading information for the purposes of its registration by a particular name or has given undertakings or assurances for that purpose which have not been fulfilled, the Secretary of State may within five years of the date of its registration by that name in writing direct the company to change its name within such period as he may specify.
(2B) Where a direction has been given under subsection (2) or (2A) above, the Secretary of State may by a further dirction in writing extend the period within which the company is to change its name, at any time before that period expires."):
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 16 and 17 en bloc. These are both consequential.
Moved, That the House doth agree with the Commons in the said amendments.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
18 Clause 25, page 32, line 15, after ("members") insert ("generally").
19 Clause 25, page 32, line 19, at end insert ("(whether or not the body is a member of the company)").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 18 and 19 en bloc. Clause 25(2)(b)(iii) requires all the assets on the winding-up of a company exempt from using the word "limited" to be transferred either to another body with objects similar to its own or to one whose objects are the promotion of charity and anything related thereto. It has been suggested that this present wording would preclude the transfer of assets on winding-up to any member or members who are themselves bodies with objects similar to those of the company being wound up. It appears to be not uncommon for charitable and other companies falling within the scope of Clause 25 to have among their members other charities or non-profit making bodies with similar objects. The object of these amendments is to make clear that bodies to which available assets could otherwise be transferred need not be excluded from consideration by reason only of the fact that they are members of the company being wound up.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
20 Clause 27, page 34, line 15, leave out ("subsection") and insert ("subsections").
21 Clause 27, page 34, line 27, at end insert—
("(1A) Subject to subsection (2) below, if the corporate name of any oversea company is in the opinion of the Secretary of State too like a name appearing on the relevant date in the index of names kept by the registrar in pursuance of section 23 of the Companies Act 1981 or which should have appeared in that index on that date or is the same as a name which should have so appeared, the Secretary of State may serve a notice on the company specifying the name in the index which the company's name is too like or which is the same as the company's name.
(2A) In subsections (2), (3) and (5) for the words "subsection (1)" in each place where they occur there shall be substituted the words "subsection (1) or (1A)".").
22 page 35, line 4, after ("(1)") insert ("or (1A)").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 21, 21 and 22 en bloc. Overseas companies which establish a place of business in Great Britain are required to register under Part X of the 1948 Act. Section 31 of the 1976 Act enables the Secretary of State to issue a notice to the company to require it to carry on business in Great Britain under a name other than its corporate name. This keeps the position of overseas companies on all fours with the position presently prevailing for 1948 Act companies. These amendments ensure that the position of overseas companies remains the same as that of domestic companies under the provisions of this Bill, and enable the Secretary of State to direct that an oversea company carry on business under a name other than its corporate name if he considers that its corporate name is the same as or too like one which appeared or should have appeared in the index maintained by the registrar at the time the company registered under Part X of the 1948 Act. It thus brings oversea companies into line with amendments governing the names of British companies. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Trefgarne.)
Lord Lloyd of Kilgerran: My Lords, in this area of international trade, I welcome this series of amendments as an improvement in relation to the status of overseas companies in bringing them into line with domestic companies.
On Question, Motion agreed to.
5.30 p.m.

COMMONS AMENDMENT
23 Clause 29, page 36, line 43, after ("letters") insert ("written orders for goods or services to be supplied to the business").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 23. The Government considered carefully the arguments advanced both in your
942
Lordships' House and in another place, that the present definition of the business documents on which particulars of ownership should be displayed was unduly restrictive. Although there are obvious practical difficulties in requiring such particulars to be shown on all documents which might be considered to be issued by a business—for example, on "cut out" coupons in newspaper advertisements—the Government were satisfied that it would be right to extend the requirement to all written orders for goods or services to be supplied to the business. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
Lord Ponsonby of Shulbrede: My Lords, we welcome this particular amendment. As the noble Lord said, it meets a number of the criticisms that were made in your Lordships' House, in particular by my noble friend Lord Mishcon, and it will indeed help the consumer in being able to trace any defaulting business.
On Question, Motion agreed to.

COMMONS AMENDMENT
24 Clause 29, page 37, line 9, after ("address") insert ("within Great Britain").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 24. Clause 29(1) requires any person carrying on business in a name other than his own to state in legible characters on all business documents details of the proprietors of the business, and to give an address at which service of any document will be effective. It is considered that as the paragraph stood, it might enable persons to give an address outside Great Britain for service, particularly a trader who has a place of business in Great Britain, but resides elsewhere. This clause seeks to ensure that the address given is within the jurisdiction of British courts. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
25 Clause 29, page 37, line 19, after ("above"), insert ("or which would have been so required but for subsection (3) below").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 25. This amendment makes it clear that subsection (2) applies to require details of proprietors to be furnished in writing immediately for partnerships of more than 20 persons to any person with whom anything is done or discussed in the course of the business and who asks for such names and addresses. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
26 Clause 29, page 37, line 24, leave out ("sent out") and insert ("issued").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 26. I understand that it was suggested by the Law Society that it would be preferable to avoid the use of different wording when describing identical actions. Clause 29(1)(a), to which Clause 29(3) refers, speaks of certain documents,
"issued in the course of the business".
Although the action to which Clause 29(3) refers is the same in effect, it might be construed to have a slight difference in meaning if it continues to refer to "documents sent out". This amendment seeks to correct that difficulty. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
27 Clause 29, page 37, line 27, after ("none") insert ("of").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 27. This amendment corrects a typographical error. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
28 After Clause 29, insert the following new clause:
("Civil remedies for breach of section 29.
. Any legal proceedings brought by any person to whom section 28 of this Act applies to enforce any right arising out of a contract made in the course of a business in respect of which he was at the time the contract was made in breach of subsection (1) or (2) of section 29 of this Act shall be dismissed if the defendant to the proceedings shows—

(a) that he has a claim against the plaintiff arising out of that contract which he has been unable to pursue by reason of the plaintiff's breach of section 29(1) or (2); or

(b) that he has suffered some financial loss in connection with the contract by reason of the plaintiff's breach of section 29(1) or (2);

unless the court before which the proceedings are brought is satisfied that it is just and equitable to permit the proceedings to continue.
This section is without prejudice to the right of any person to enforce such rights as he may have against another person in any proceedings brought by that person.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 28. This amendment reflects the Government's acceptance of representations made in another place that the introduction of a civil sanction for breach of the provisions relating to the disclosure of information regarding the ownership of businesses carried on under business names would provide a desirable reinforcement of the criminal sanction for breach of those provisions. We had originally consulted on the case for including a provision on the lines of Section 8 of the 1916 Act, but the consultations suggested that such a sweeping power would not be appropriate.
On further consideration the Government have
944
accepted that there was a need for a narrower power, as set out in this clause, to prevent the possibility that the owners of a business who had failed to comply with their disclosure obligations under Part II of the Bill should be able to enforce a contract against a person who had been unable to pursue a remedy or had suffered some financial loss in connection with the contract because of the failure to comply. The clause enables the court to grant relief only if it thinks it just and equitable to do so. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
Lord Ponsonby of Shulbrede: My Lords, the enforcement of the control of the use of business names is the subject of this amendment, and in a sense it is self-evident that there needed to be an enforcement procedure. However, following the doing away with the Registry of Business Names, and the consequential saving of 65 staff, in the light of the introduction of this new clause, involving the necessary enforcement of the two previous clauses, one must ask how many people will be involved in the enforcement procedure? It could well be that the enforcement procedure will reflect on the strength not of the Civil Service but perhaps the local authorities. I wonder whether the noble and learned Lord can give your Lordships any idea of the number of additional staff which the enforcement procedure will involve and say whether there is any net saving at all in staff.
Lord Mackay of Clashfern: My Lords, the enforcement procedure which is incorporated in this amendment is by way of preventing a person who is in breach of his obligations from enforcing his contract in the defined circumstances, and therefore I cannot see that any kind of manpower requirement is at all involved here. It is between the parties to the contract that this point would arise, as an incident of litigation between them, if it came to that.
On Question, Motion agreed to.

COMMONS AMENDMENT
29 Clause 30, page 38, line 10, leave out Clause 30.
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 29. The previous inclusion of this clause was intended to allow the Secretary of State to dispose of the records currently held by the Registrars of Business Names, following the abolition of the registers in London and Edinbrugh. However, although a number of organisations did respond to the Secretary of State's invitation to submit proposals, none was prepared to accept the conditions which he had thought proper to attach to any disposal. In particular, they considered that the value of the records would diminish rapidly in the absence of any statutory registration requirement. The Government's view, reflected in this Bill, was that this was not an area in which they considered statutory registrations to be justified, and that in any event it would not have been appropriate to devolve statutory powers to a private organisation. Accordingly, as the offer had failed to elicit any effective response over an extended period, it was withdrawn

945
by the removal of the clause which would have permitted such disposal. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
Lord Ponsonby of Shulbrede: My Lords, can the noble Lord tell your Lordships what in fact will now happen to the records?
Lord Trefgarne: My Lords, I understand that most of the records will be destroyed, but that will not preclude the Public Records Office from taking any that it might think are necessary to hold for historical purposes.
On Question, Motion agreed to.

COMMONS AMENDMENT
30 After Clause 32, insert the following new clause:
("Temporary extension of power to require company to change its name
. (1) In relation to any company which was first registered, or registered by a new name, at any time during the period beginning with 18th March 1981 and ending with 23rd August 1981 section 18(2) of the 1948 Act (power of Secretary of State to direct company registered by name too like an existing company's name to change its name) shall have effect as if for the words "within six months of its being registered by that name" there were substituted the words" before 24th February 1982".
(2) Where in the case of any oversea company the relevant date within the meaning of section 31(2) of the 1976 Act (date of delivery of certain documents on the company's first establishing a place of business in Great Britain or date of return as to change in the company's corporate name) falls within the period mentioned in subsection (1) above, section 31(2) (which restricts the power of the Secretary of State to serve a notice under subsection (1) of that section in effect requiring an oversea company to use a name other than its corporate name for carrying on business in Great Britain) shall have effect in relation to that company as if for the words from "six months" (in the first place where they occur) to "this section" (in the second place where they occur) there were substituted the words" 23rd February 1982".
(3) This section applies in relation to any such company as is mentioned in subsection (1) or (2) above notwithstanding the fact that the period of six months mentioned in section 18(2) or (as the case may be) in section 31(2) has expired in the case of that company before this section comes into operation.
(4) In this section "oversea company" has the meaning given by section 406 of the 1948 Act.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 30. One of the results of the recent industrial action within the Civil Service was that the index of company names was not updated by the Registrar of Companies between 18th March and 23rd August 1981 inclusive, and was therefore not available for inspection by members of the public. This index is the present non-statutory version of the index which will be required to be kept under Clause 23. As your Lordships know, this is the record that companies may use to check on other companies' registrations. In respect of names registered during the absence of the index, objecting companies may subsequently have, or have had, only a restricted time in which to examine the index and lodge their objections before the expiry of the six-month period within which objections may be tabled. We have received representations about this
946
and consider that the absence of the index, caused by industrial action, may have resulted in companies being registered by names which are "too like" those of existing companies and that, in the circumstances, we are justified in extending the period in which a direction under Section 18(2) may be given in respect of names registered in that period. It is that which this amendment achieves. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
Lord Lloyd of Kilgerran: My Lords, I am much obliged to the noble and learned Lord for explaining that. This is one of the clauses that I found incomprehensible. I was quite wrong. Now that the noble and learned Lord has explained it, it is quite clear: it is due to the industrial action that occurred. I am much obliged to the noble and learned Lord.
On Question, Motion agreed to.
5.40 p.m.

COMMONS AMENDMENTS
31 Clause 35, page 40, line 33, leave out ("36 to") and insert ("(merger relief), 38 and").
32 Clause 35, page 40, line 35, leave out from ("account)") to end of line 39 and insert ("in the circumstances mentioned below in this section").
33 Clause 35, page 40, line 40, leave out ("sections 36 to") and insert ("section (merger relief)or").
34 Clause 35, page 40, line 41, leave out from ("company") to ("only") in line 43 and insert—
("issues or has issued shares in circumstances to which either of those sections applies, but in the case of an issue which took place before the section in question came into operation").
35 Clause 35, page 41, line 4, at end insert—
("(4) References in sections (merger relief), 38 and 39 of this Act to the issuing company are references to the company issuing the shares as mentioned in subsection (2) or (3) above.")'
36 After Clause 35, insert the following new clause:
("Merger relief
.—(1) Subject to section 38(5) of this Act, this section applies where the issuing company has secured at leaset a ninety per cent. equity holding in another company in pursuance of any arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided by the issue or transfer to the issuing company of equity shares in that other company or by the cancellation of any such shares not held by the issuing company.
(2) Where the equity shares in the issuing company allotted in pursuance of the arrangement in consideration for the acquisition or cancellation of equity shares in the other company are issued at a premium, section 56 of the 1948 Act shall not apply to the premiums on those shares.
(3) Where the arrangement also provides for the allotment of any shares in the issuing company on terms that the consideration for those shares is to be provided by the issue or transfer to the issuing company of non-equity shares in the other company or by the canellation of any such shares in that company not held by the issuing company, the relief from section 56 provided by subsection (2) above shall extend to any shares in the issuing company allotted on those terms in pursuance of the arrangement.
(4) Subject to subsection (5) below, the issuing company shall be regarded for the purposes of this section as having secured at least a ninety per cent. equity holding in another company in pursuance of any such arrangement as is mentioned in subsection (1) above if in consequence of any acquisition or cancellation of equity shares in that

947
company in pursuance of that arrangement it holds equity shares in that company (whether all or any of those shares were acquired in pursuance of that arrangement or not) of an aggregate nominal value equal to ninety per cent. or more of the nominal value of that company's equity share capital.
(5) Where the equity share capital of the other company in question is divided into different classes of shares this section shall not apply unless the requirements of subsection (1) above are satisffied in relation to each of those classes taken separately.
(6) Shares held by a company which is the issuing company's holding company or subsidiary or a subsidiary of the issuing company's holding company, or by its or their nominees, shall be regarded for the purposes of this section as held by the issuing company.
(7) In this section "equity share capital" has the meaning give by section 154(5) of the 1948 Act; and, in relation to any company, "equity shares" means shares comprised in that company's equity share capital and "non-equity shares" means shares in that company of any class not so comprised.").
37 Clause 36, page 41, line 5, leave out Clause 36.
38 Clause 37, page 42, line 18, leave out Clause 37.
39 Clause 38, page 43, line 25, at end insert:
"(5) Section (Merger relief) of this Act shall not apply in any case to which this section applies.").
40 Clause 39, page 43, line 26, after ("Act") insert ("and subsection (1A) below").
41 Clause 39, page 43, line 27, leave out from ("issued") to end of line 37 and insert:
("at a premium shares which were allotted in pursuance of any arrangement providing for the allotment of shares in the issuing company on terms that the consideration for the shares allotted was to be provided by the issue or transfer to the issuing company of shares in another company or by the cancellation of any shares in that other company not held by the issuing company.
(1A) The other company in question must either have been at the time of the arrangement a subsidiary of the issuing company or of any company which was then the issuing company's holding company or have become such a subsidiary on the acquisition or cancellation of its shares in pursuance of the arrangement.").
42 Clause 39, page 43, leave out lines 41 to 44.
43 Clause 39, page 44, line 5, leave out subsection (3).
44 Clause 40, page 44, line 13, leave out ("37 to") and insert ("(Merger relief), 38 and").
45 Clause 40, page 44, line 15, leave out second ("the") and insert ("any").
46 Clause 40, page 44, line 16, leave out from first ("shares") to ("to") and insert ("or other consideration provided for the shares issued is").
47 Clause 40, page 44, line 26, leave out ("36 to") and insert ("Merger relief), 38 and ").
48 Clause 40, page 44, line 36, leave out subsections (4) to (6).
49 Clause 40, page 45, line 18, leave out ("36 to") and insert ("Merger relief), 38 and").
50 Clause 40, page 45, line 30, after ("sections") insert ("(Merger relief)").
51 Clause 40, page 45, line 33, at end insert—
("(8A) in sections (Merger relief) and 39 of this Act "arrangement" means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with section 206 or 287 of the 1948 Act).").
52 Clause 40, page 45, line 34, leave out ("36 to") and insert ("(Merger relief), 38 and").
53 Clause 40, page 45, line 36, leave out from ("corporate") to end of line 38.
54 Clause 41, page 46, line 3, after ("appropriate") insert ("(a)").
55 Clause 41, page 46, line 5, at end insert ("or
(b) for restricting or otherwise modifying any relief from those requirements provided by sections 35 to 40 and (Merger relief) of this Act.").
Lord Mackay of Clashfern: My Lords, with your Lordships' permission I should like to deal with Amendments Nos. 31 to 55 together. Your Lordships
948
may recall that at Report stage on 7th April I explained at some length the rationale behind the Government's intention, on the basis we were then able to establish in this complicated area, to give somewhat restricted relief, certainly as to future transactions, from Section 56 of the 1948 Act. I also gave an assurance in response to a question from the noble Lord, Lord Bruce of Donington, that the Government would give very careful consideration to any generally agreed proposals which might emerge from a joint working party, formed at the initiative of the CBI and comprising, besides, representatives of the Law Society and the CCAB, whose objective was to ascertain whether a consensus in favour of a somewhat broader measure of relief from Section 56 than that put forward by the Government at that time could be established.
In June the joint working party established such a consensus and submitted recommendations to the Government. Briefly, it recommended that Section 56 should not apply:
"in the case of any share-for-share transaction involving the issue of equity shares by one company as a result of which it becomes the holder of 90 per cent. of the equity shares in another company".
This recommendation was intended to replace Clauses 36 and 37 (prospective relief) with a much broader exemption from the requirements of Section 56, and was supported by a number of detailed recommendations. Your Lordships will remember that Clauses 36 and 37 concerned reliefs for the future, and it is with these that I am dealing at the moment.
The joint working party further recommended that within the legal framework which it proposed accounting standards should define the appropriate accounting treatment for particular types of acquisitions and mergers. Finally, the working party recommended that where a merger or acquisition qualified for relief from Section 56 the issuing company should be required to disclose in its accounts, after the transaction, certain information about the names of the combining companies, the form of the transaction, the accounting treatment adopted for the combination and certain other, financial information concerning the previous and subsequent performance and actions of the companies. The working party suggested that this information might be required by the law or by an accounting standard.
These recommendations were fully supported by the CBI and the Law Society. The CCAB as a body also supported the recommendations while indicating that it had certain reservations concerning the accounting treatment of different types of business combination. It accepted that the applicability of so-called merger accounting, as distinct from relief from Section 56, would be a matter for an accounting standard rather than the law. The chairman of the accounting standards committee expressed his support for the recommendations as the basis for a legislative framework within which an appropriate accounting standard could be developed, and work on such a standard has already begun.
I should like to pause at this point to repeat the Government's tribute, already paid in another place, to the skill and rapidity with which the joint working party conducted its deliberations and reported its

949
conclusions to the Government. I think everyone concerned was very anxious that a consensus should be reached on this extremely difficult and technical problem. The joint working party hastened to that, and I believe it is outstanding work that it was able to reach such a fairly simple consensus.
I should like to say just a little more about this. The Government were satisfied that the joint working party had made significant progress in this difficult area by identifying this much broader consensus, and in recognition of this the Government felt able to bring forward amendments based on the joint working party's recommendations. In broad terms, the Government propose to implement the spirit of the working party's main recommendation so as to broaden significantly the scope of the relief from Section 56. The substance of the new proposals, which replace the prospective relief provided at present in Clauses 36 and 37, is contained in the new clause, Amendment No. 36.
I should perhaps draw your Lordships' attention to two particular aspects of the new clause. First, the relief is to be available in the future in respect of any transaction which secures the necessary 90 per cent. holding in an acquired company. In other words, in contrast to the Government's original proposals, there is no longer any requirement that the issuing company should have been formed for the express purpose of acquiring, or have been dormant until acquiring, the acquired company.
Second, again in contrast to the earlier clauses, there is no requirement for a "general offer for equity shares on a share-for-share basis". This concept was regarded as too restrictive and has been replaced by that of a broadly defined "arrangement" which, in response to representations made to the Government, includes an arrangement sanctioned in accordance with Section 206 or 287 of the 1948 Act. Clause 38, which deals with intra-group reconstructions, is to be retained as providing necessary additional scope for relief in respect of certain transactions outside the terms of the new clause. The clause provides slightly more restricted relief than the new clause in order to take account of the special characteristics of intra-group reconstructions. Amendments in another place therefore made clear that all such reconstructions, even those which would also fall within the terms of the new clause, are to be subject to Clause 38.
Clause 39, which deals with retrospective relief from Section 56, has been amended slightly to take account of the principles underlying the new clause, as has Clause 40, which makes necessary supplementary provisions. Clause 41 has been slightly amended with an eye on negotiations in Brussels on the draft seventh directive on group accounts. The directive will contain provisions which bear on the treatment of business combinations in group accounts, and we cannot be sure that the terms of the directive, as it finally emerges, will be exactly congruent with the proposals in these clauses. We think it wise to amend just to cover the possibility that further action will be required, which possibility would not be covered without such an amendment.
Last, but by no means least—and I am grateful for your Lordships' patience—I should refer again to the recommendations of the joint working party in respect
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of disclosure of information. The Government accept that the new broad prospective relief from Section 56 should be complemented by disclosure provisions. However, in order to allow further consultation on the detail of these provisions, and to provide flexibility for the future, it is proposed to legislate on this matter by means of regulations under Section 454 of the 1948 Act, as amended by the Bill.
I trust that your Lordships will now feel that I have reasonably explained the Government's revised proposals on relief from Section 56. This was a problem which I think was one felt on all sides of the House to be an important problem which the Government should, if possible, try to solve in the course of this Bill, and I believe that we have satisfactorily solved it. I beg to move that this House doth agree with the Commons in their Amendments Nos. 31 to 55 inclusive.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
Lord Wedderburn of Charlton: My Lords, I had hoped to put something to the noble and learned Lord before he sat down, and it may be that perhaps I am out of order, but it might make for speed if I ask him to clarify a simple point. Is it the case that the relevant clauses or sections will not be brought into effect until the regulations on the disclosure of information are in effect as well?
Lord Mackay of Clashfern: My Lords, I think that, so far as prospective relief is concerned, the situation is that we have provided a date for that, which I think is 4th February 1981, which is the date on which the proposals were first made. 1 would hope that the regulations will come along sufficiently quickly to give an effective follow-up to that, because the regulations are to affect work which proceeds from the merger rather than making it permissible.
Lord Bruce of Donington: My Lords, the noble and learned Lord has been kind enough to refer to the assistance he has received from the consultative committee and accountancy bodies. I should like to reiterate their general support for the proposals which he has sought to incorporate in his amendments, but on their behalf I should like to reserve their position until they have had an opportunity to examine them in detail.
On Question, Motion agreed to.
5.50 p.m.

COMMONS AMENDMENT
56 Clause 42, page 46, leave out lines 15 to 30 and insert:
("(1) Subject to the following provisions of this section and sections (Relaxation of section 42 restrictions for private companies) and (Provisions supplementary to section (Relaxation of section 42 restrictions for private companies)) of this Act, where a person is acquiring or is proposing to acquire any shares in a company it shall not by lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place.
(1A) Subject to the following provisions of this section and sections (Relaxation of section 42 restrictions for private companies) and (Provisions supplementary to section (Relaxation of section 42 restrictions for private

951
companies)) of this Act, where a person has acquired any shares in a company and any liability has been incurred (by that or any other person) for the purpose of that acquisition it shall not be lawful for the company or any of its subsidiaries to give any financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred.
(2) Subsection (1) above shall not prohibit a company from giving any financial assistance for the purpose of any acquisition of shares in the company or its holding company if—

(a) the company's principal purpose in giving that assistance is not to give it for the purpose of any such acquisition or the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company; and

(b) the assistance is given in good faith in the interests of the company.

(2A) Subsection (1A) above shall not prohibit a company from giving any financial assistance if—

(a) the company's principal purpose in giving the assistance is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of any shares in the company or its holding company or the reduction or discharge of any such liability is but an incidental part of some larger purpose of the company; and

(b) the assistance is given in good faith in the interests of the company.

(2B) Subsections (1) and (1A) above shall not prohibit—

(a) any distribution of a company's assets by way of dividend lawfully made or any distribution made in the course of the winding up of the company;

(b) the allotment of any bonus shares;

(c) anything done in pursuance of an order of the court made under section 206 of the 1948 Act (compromises any arrangements with creditors and members);

(d) anything done under an arrangement made between a company and its creditors which is binding on the creditors by virtue of section 306 of the 1948 Act;

(e) anything done under an arrangement made in pursuance of section 287 of the 1948 Act (power of liquidator to accept shares, etc. as consideration for sale of property of company;

(f) any reduction of capital confirmed by order of the court under section 68 of the 1948 Act;

(g) a redemption or purchase of any shares made in accordance with sections 43 to 45, (contingent purchase contracts) 46 (Assignment or release of company's right to purchase own shares), (Payments apart from purchase price to be made out of distributable profits), 47 to 54, (Supplementary provisions relating to Part III of 1980 Act), (Power to alter certain provisions with respect to redemption or purchase by a company of its own shares) and 56 of this Act.").

57 Clause 42, page 46, line 31, leave out ("Subsection (1)") and insert ("Subsections (1) and (1A)").
58 Clause 42, page 46, line 36, after 'scheme' insert ("within the meaning of section 87(1) of the 1980 Act)").
59 Clause 42, page 46, line 38, leave out ("by the trustees of the scheme").
60 Clause 42, page 47, line 2, leave out ("company's net assets") and insert ("company has net assets which").
61 Clause 42, page 47, line 2, leave out lines 6 to 24 and insert—
("(5) In this section "financial assistance" means—

(a) financial assistance given by way of gift;

(b) financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver;

(c) financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of any other party to the agreement remains unfulfilled or by way of the novation of or the assignment of any rights arising under any loan or such other agreement; or

(d) any other financial assistance given by a company the net assets of which are thereby reduced to a
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material extent or which has not net assets.

In this subsection "net assets" has the same meaning as it has for the purpose of the 1980 Act.
(5A) Any reference in this section to a person incurring any liability shall be read as including a reference to his changing his financial position by making any agreement or arrangement (whether enforceable or unenforceable and whether made on his own account or with any other person) or by any other means.
(5B) Any reference in this section to a company giving financial assistance for the purpose of reducing or discharging any liability incurred by any person for the purpose of the acquisition of any shares shall be read as including a reference to the company giving financial assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place.
(5C) For the purposes of subsection (4) above—

(a) "net assets", in relation to the giving of financial assistance by any company, means the amount by which the aggregate amount of the company's assets exceeds the aggregate amount of its liabilities taking the amount of both assets and liabilities to be as stated in the company's accounting records immediately before the financial assistance is given; and

(b) "liabilities" includes any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.").

Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 56, and I should like to speak also to Amendments Nos. 57 to 61. We are now in the area to which the noble Lord, Lord Wedderburn, referred in the course of his remarks in the earlier debate. These amendments make important changes to Clause 42 of the Bill. Clause 42 was introduced to replace Section 54 of the 1948 Act, which prohibits financial assistance by a company for the purchase of or subscription for its shares or those of its holding company, if it has a holding company. Some of your Lordships will remember that we had a good deal of debate on this at earlier stages of the Bill in this House.
I should like to express on behalf of the Government gratitude for the very considerable help that the Government derived from these discussions. I think that, even during the time the matter was being discussed in this House at the various stages, the tide flowed backwards and forwards a bit, and the climax of the flowing came when the noble Lord, Lord Wedderburn, and my noble friend Lord Selkirk and others joined together in promoting an amendment.
During the initial stages of this Bill, the department was consulting with bodies such as the Law Society and the Committee of London Clearing Banks on the implications of certain recent decisions which were considered to require an undesirably restrictive application of Section 54 to commercial transactions which had not previously been considered to fall within the scope of the prohibition. My noble friend Lord Selkirk—I am sorry he is unable through illness to be here today—informed the House that the section had become known as the "bankers' bogey"—that is, the trap-for-the-innocent side of the matter, to use Lord Wedderburn's phrase.
Clause 42 was tabled by the Government at Report stage, and it is fair to say that neither then nor at Third Reading did it meet with the unanimous approval

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of this House. At the end of Third Reading, with some gentle encouragement from my noble friend Lord Selkirk, I undertook that the Government would propose an amendment to this clause in another place. I think I can safely say that that undertaking has been thoroughly fulfilled. The amendments before the House are of considerable significance. They derive from a very intensive process of consultation that has taken place throughout the period since the Bill left this House. I understand that, in the view of those most closely concerned with these matters in the commercial world, the amendments represent a considerable improvement in the provisions, and indeed have their full support. Amendments Nos. 56 to 61 must be read in conjunction with Amendments Nos. 62 and 63, which provide special provisions for private companies, but first I propose to deal with the amendments to Clause 42.
The most important Commons amendment is clearly the first, Amendment No. 56. This has two distinct elements. First, subsections (1), (1A), (2) and (2A) reformulate the basic provision and the general defence that are in subsections (1) and (2) of Clause 42 in the Bill. Secondly, a new subsection (3) contains a list of transactions which are to be exempt from the prohibition in all circumstances. Your Lordships may remember that at an earlier stage, the noble Lord, Lord Wedderburn, was rather in favour of the list and then later was rather against it, while we have fluctuated in our view about this and have eventually decided that it is wise to propose the list.
The essential change in subsection (1), the restatement of the prohibition, is that the reference to financial assistance given in connection with acquisition has been dropped. The expression "in connection with" could be interpreted as referring only to financial assistance given after an acquisition, but it has also given rise to great uncertainty of interpretation and has been a major element in the extension of the field of the prohibition because of the very wide range of transactions which can be said to be "connected" with a particular acquisition of shares. It is argued, for example, that where, by virtue solely of the terms of the holding company's standing financial arrangements with its bankers, a new subsidiary charges its assets as security for group borrowings, then that subsidiary is, in fact, providing prohibited assistance, because although there may be no causal link between the assistance and the acquisition, there is a connection since, without the acquisition, the assistance would not have been given.
The new provisions accordingly now distinguish explicitly between financial assistance given before or at the same time as an acquisition, and financial assistance given after the event. This is the primary reason why we want to make this division: to try to get over the difficulty which, in practice, has been found to arise from this reason. Financial assistance given directly or indirectly for the purpose of an acquisition before or at the same time as the acquisition is prohibited in the new subsection (1). Financial assistance given after the acquisition to relieve any persons of a liability incurred for the purpose of the acquisition is prohibited by subsection (1A). The effect of a return to "in connection with" would be a reintroduction of uncertainty on an unacceptable scale. Accordingly I
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could not commend to the House proposals to that end about which you will no doubt hear in a moment.
The phrase "for the purpose of reducing or discharging the liability so incurred" is designed to isolate the mischief as actions which have a direct link with the financial commitments undertaken to achieve the acquisition, and I am pleased to note from Amendment No. 56A that noble Lords opposite see virtue in it. So far as Amendments 56B and D are concerned, the wording in the Commons amendments seem to us to be clearer and more direct, and these are particularly important attributes on a clause such as this normal wording as experience has suggested.
As the offence has now been divided into two, so the defence has been divided in subsections (2) and (2A) to apply respectviely to financial assistance before or at the same time as acquisition, and such assistance after acquisition. The condition in Clause 42(2)(c) that the assistance is given in good faith in the interests of the company is retained in both subsections. But, not least in the light of the critical comments made in this House at Third Reading, references to a power conferred by an instrument or resolution which were clearly regarded as obscure have been deleted. The subsections continue to found the defence on the company's purpose in giving assistance. However, I hope that noble Lords will feel that the concentration on "principal purpose" rather than "purpose or principal purpose" and the latter part of subsection (2)(a) and (2A)(a) make it considerably clearer what test a company must pass if it is not to provide prohibited assistance. We believe that these provisions in particular will help to remove recent uncertainties.
Before turning to subsection (3), I should like to refer briefly to Amendments 56G to L, which contain three different elements. Amendments Nos. 56G and 56I would delete what we see as essentially clarificatory phrases which those whom we have consulted have found particularly helpful in defining the scope of the defences. Amendments Nos. 56H and 56L seek to deal with the civil consequences where a third party (I assume a third party, although the drafting would appear to encompass the company itself also) seeks to take advantage of the defences in subsections (2) and (2A). I am not wholly clear what is seen to be the difference in practice between the clause as amended by Amendment No. 56 and with the addition of provisions along the lines of Nos. 56H and 56L. The fact is that anyone seeking to rely on the defences would, if tested, have to demonstrate that he reasonably believed that they were substantiated.
Regarding Amendments Nos. 56J and 56K, I am afraid that we found these difficult, and it may be that the noble Lord will explain them more fully later. In so far as they extend the onus of proof on a third party, we believe that they may go unreasonably far, because it seems unreasonable to expect a third party to inquire beyond the company's purpose in providing assistance to establish the purpose of the assistance itself.
Amendments Nos. 56A and 56F effectively seek to return to a more conventional formulation of the offence and to restrict the defences. There appears to be a basic difference of view on this, and we do not consider that those amendments strike the right balance between appropriate restriction of a mischief

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and reasonable commercial flexibility. It is clear from our consultations on this matter that they unacceptably inhibit entirely worthy group financial arrangements. I appreciate what has been said already. It is very difficult to get the line right in this case and to have reasonable freedom for perfectly legitimate financial transactions and those which are not reasonable.
Lord Bruce of Donington: My Lords, before the noble and learned Lord the Lord Advocate finishes making his points, I wonder whether he will inform the House if the proposals set out in Amendment No. 56 and also in Amendment No. 61 to which he has been speaking, were discussed in draft amendment terms with the Consultative Committee of Accountancy Bodies, or was there agreement with them as to the more general principles which will be followed? This is very important because I do not wish the CCAB to be saddled with the complete responsibility of approving every jot and tittle incorporated in both amendments.
Lord Mackay of Clashfern: My Lords, I believe it would be right for me to say in general terms that the Government have tried to consult on these technical matters as widely and as fully as possible. Nevertheless, having so consulted the responsibility for the amendments is that of the Government. Even if we had consulted on the absolute final detail of the amendment, I would still say that the Government had that responsibility. I am seeking to inquire in what detail this was put to the CCAB, but it would be quite unfair for me to do more than to say that we benefited very much from their help and we understood that, at least in general terms, the CCAB were in agreement with it. So far as the other bodies which we consulted are concerned, I would feel very much the same thing.
The recent uncertainty about the scope of Section 54 has extended to the application of the prohibition to forms of payment, which have been widely considered not to be covered. The new subsection (2B) is intended to put beyond doubt that certain transactions which are expressly provided for in company law and which may result in payments which are used to purchase the shares of the company can never fall within the scope of the prohibition. The approach embodied in this subsection was, as I said, debated on Third Reading when I expressed considerable reservations about exempting completely transactions such as dividends. On reflection, however, we now recognise that our earlier resistance to what might loosely be called the "list approach" did not pay sufficient regard to the possible overlap of different protective provisions in company law.
Even in the case of dividends, which are dealt with in (3)(a), which Amendment No. 56M seeks to delete, Parliament has legislated since the introduction of the original prohibition in Section 54 to regulate the distribution of a company's assets in Part III of the Companies Act 1980, with the interests of creditors particularly in mind. The reference to "dividend lawfully paid" in the proposed amendment ensures not only the protection of creditors by applying the provisions of Part III of the 1980 Act, but also ensures
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that any funds distributed are paid as a dividend in compliance with the provisions of a company's articles, which will normally safeguard the interests of any minority shareholders by ensuring equality of treatment between holders of the same class of shares.
It is worth noting that the Jenkins Committee stated that it should be made clear that Section 54 did not prohibit dividends, and it is fair to say that it has been widely considered that Section 54 did not in fact prohibit dividends. Similarly, the other specific exemptions provided in subsection (2B) cover transactions which company law regulates in order to protect those legitimately interested in the disposal or deployment of a company's assets.
So far as the Opposition amendments are concerned, we disagree with the policy behind Amendments Nos. 56N and 56P as detracting from the clean exclusion of the transactions set out in subsection (2B). We believe that this is a very important part of the clarity of the proposal. Moreover, Amendment No. 56P appears to embody a somewhat strange concept of a lawful transaction, perhaps a dividend, that is not in good faith and in the interests of the company. So far as Amendment No. 56Q is concerned, we do not see that it adds anything.
Dealing briefly with the remaining Commons amendments to Clause 42, Amendment No. 57 is consequential on Amendment No. 56. Amendment No. 58 inserts a definition of "employee share scheme" which was previously in subsection (7) which a later amendment deletes. Amendment No. 59 deletes the requirement that funds made available by a company in accordance with an employee's share scheme for the acquisition of shares must be provided to trustees. Such a change has been urged on the Government by a number of commentators, particularly in the context of our provisions to enable companies to purchase their own shares. The requirement that employee share schemes must have trustees—which has been the effect of the existing provision so far as company law is concerned—seems to have been as much for administrative convenience as to safeguard the beneficiaries. Amendment No. 60 is a drafting amendment.
Amendment No. 61, finally, contains a number of important definitional provisions to support the earlier subsections. The definition of "financial assistance" previously in subsection (5)(i) has been refined and revised in the new subsections 5(a), (b) and (c) in the light of extensive consultations. The reference to "net assets" previously in (5)(a)(ii) and now in 5(d) has been amended to cover the case of a company without net assets but unlike other references to net assets in the clauses which I shall deal with later, is a test by reference to actual asset values.
Subsections (5A) and (5B) clarify the scope of references respectively to incurring a liability for the purpose of an acquisition—which arises on subsection (1A)— and reducing or discharging such a liability, which arises on subsections (1A) and (2A). The amendments make clear that in deciding the question of whether financial assistance has been given after an acquisition it is necessary to look at the overall financial position of any person involved: the use of the word "liability" is not confined to the normal strict legal meaning.

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Finally, subsection (5C) provides that, for the purposes of subsection (4) only—that is subsection (4) as in the Bill—the question of whether net assets are reduced is to be determined by reference to book values, rather than, under Clause 42 as it stands, actual values. Subsection (4), which has not been significantly amended, restricts any assistance given by a public company under the exemptions in subsection (3) for general lending which is part of the ordinary course of business, for provision of funds in accordance with an employee share scheme and for lending to employees, to such assistance as does not reduce net assets or which is provided from distributable profits. In applying the standard of book values the amendment reflects the policy of the EC Second Directive on Company Law and responds to comment to the department that in that context a reference to actual values was unduly harsh. It is considered that this is justified in the case of the limited types of payment permitted under subsection (4).
My Lords, I hope that my explanation of the reasoning behind the Government amendments and of our reservations about the amendments to the amendments which are being proposed, may enable your Lordships to understand our approach to this matter and will commend the amendments to your Lordships. I beg to move.
Moved, That this House cloth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern,)
6.9 p.m.
As an amendment to Amendment No. 56:
56A Leave out subsections (1) and (1A) and insert—
("Subject to the following provisions of this section and of any other provision of this Act, it shall not be lawful for a company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of or in connection with the acquisition or proposed acquisition of its shares, whether that assistance is given before or at the time of the acquisition or after the acquisition either by reducing or discharging any liability or otherwise".).
Lord Wedderburn of Charlton: I am sure your Lordships are grateful to the noble and learned Lord the Lord Advocate for his explanation and for giving us a greater understanding of Amendment No. 56—although I myself could not follow the speed with which he went through our amendments to the amendment because he chose not to do so either in alphabetical order or indeed in the clusters which were my clusters. I shall do my best to move Amendment No. 56A and, conveniently, in view of what the noble and learned Lord Advocate has said, I will take with it, if your Lordships agree, Amendments Nos. 56C and 56E.
It is necessary to match the noble and learned Lord Advocate's introduction with a few words on what these amendments are all about, and then it will not be necessary to make points on individual amendments.
The noble and learned Lord in our previous debates—as today—has adverted briefly to the fact that ever since 1929 Parliament has regarded it as grossly improper for a company to provide financial assistance for the purchase of its own shares. The question has been: Where should the limit be laid? It has been
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accepted as an abuse both in our statutes of 1929 and 1948, and by the second European Economic Community directive in Article 23. It is widespread knowledge that it is improper. Indeed, in report after report of the Department of Trade inspectors, although it has been made a crime in the past, it very frequently appears at the centre of the spider's web of this or that malpractice.
Therefore, those who counsel that the barrier of Section 54 should be removed must be listened to very carefully and with caution because financial assistance for the purchase of the company's shares is at the centre of a very large number of malpractices. It is also true—and this is where I join the noble Earl, Lord Selkirk—that the section as it has stood since 1948 was a quite unnecessary harassment for what we chose to call the innocent. They were usually bankers—but not always—or people who advanced money in some form to the company not knowing that it would be in any way used for this purpose.
Therefore, we jointly criticised the Government on 30th April because the clause did not protect the innocent sufficiently and did not deter the guilty sufficiently. The Government went away and, as the noble and learned Lord has told us, had consultations. May I say a word about consultations? I am not being critical of the Government, their advisers or anyone else in the way that they go about things. In this particular matter, as perhaps on so many company law matters, unless one is careful one is always consulting with the innocent. No man in the City is going to say: "I break Section 54 every day". He is going to be a person who wants to avoid breaking the law. So he will want the widest gateways for the innocent.
With whom did the Government consult? Did they consult with the guilty or those with who were interested mainly in the apprehension of the guilty? Did they consult with the TUC? There is great interest there in this matter. Did they consult with those who prosecute? If so, what did those who prosecute say? It may be they did not and it is not usually done perhaps. But it should be done. I read the clause put to the other place in Committee on 30th June. I thought it was too relaxed, even more for the innocent. There was nothing to catch the guilty. In the other place on Report, just one week ago, the Government not only opened all the gateways to the innocent and guilty together, they totally changed their philosophy. As this involves the noble and learned Lord speaking today and speaking on 30th April I must make my point stick. I will, if I may, quote in a moment what he said then and what he says now. The philosophy of the Government has totally changed not between those two dates but between 30th June and 20th October. The 20th October clause which we have before us now is a totally new concept to open the gates. I believe that it could be said that this clause, by laying down an ineffective prohibition and widening the gates to such enormous exemptions does not effectively comply with the directive. I do not believe that it complies with Article 23 because it is completely ineffective.
It is the purpose of these amendments, of which this is the first, to test out the different points. In that respect a central point on which this first amendment

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challenges the clause is its omission of the words "in connection with" and its insistence that there shall be no offence unless the assistance is given for the purpose of the acquisition of shares. The two phrases are of course different. May I dub them in this way: the purpose phrase denotes a subjective test.
The connection phrase dubs an objective test; that is, as the noble and learned Lord has said, anything which is connected may include anything which has a casual link. Financial assistance given out of the company's assets which has a causal link with the purchase of shares. I do not apologise for spending a little time on this first amendment because it goes to the root of the clause, and taking it with the other two amendments, Amendments Nos. 56C and 56E, I hope your Lordships will agree that we can make progress on all three amendments together.
The noble and learned Lord said that "assistance in connection with the acquisition of shares" includes everything where there is a causal link. He said that they want to keep it to a causal link. My first comment is that leaving in the phrase, "assistance for the purpose of acquisition of shares", does not include every kind of causal link. The word, "purpose", does not include every result. You can do something which has a result; you may even know it. But it is not for the purpose of doing it unless there is some intention. Therefore, we find that of the three areas which can be covered—namely, anything in connection with or anything which has the result or anything which is intended—the Government only intend to include the third.
Whose intention is it? Whose purpose is it? We are looking at the purpose of the company to begin with. The purpose of the company will rest on the evidence that has to be obtained primarily from the boardroom. We canvassed these areas on 30th April. With great respect, I am rather disappointed that the noble and learned Lord did not deal with the very obvious arguments against Amendment No. 56 which were put on Third Reading in this House in respect of another clause but which equally apply here in what he said. He said nothing about them at all. Is it not the case that evidence of purpose in the company's case will rest very largely on what comes out of the boardroom? Is it not the case that two rogue elephant directors among five could ensure that it was very hard for the prosecution to prove that the company's purpose was that which it has to prove if it has to prove an offence is committed?
I am aware that the purpose of directors individually apprehended as in default of this clause would rest upon the ordinary rules of evidence. Even there I say that it is not enough for the protection of the money of the shareholders and creditors. Also I wish to add employees. To be frank, I am a little fed up of hearing company law discussed entirely in terms of shareholders and creditors. Also the workers are involved and the community. Everybody has an interest in not seeing the company's assets squandered on purchase of its own shares as part of a malpractice. I stress this because of the Government's own exemptions in the subsections we are coming to such as in (2)(a) and (2)(b). Assume them to be in the Bill, and the Government have their way, which I suppose
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a rational human being this evening would predict they may—why not have a wide offence? Why narrow the area of liability if there are plenty of gateways for the guilty?
The Government will be suspected of a peculiarly devious intention if, having enacted very wide gateways for the innocent bankers (which may well be necessary) they go on to enact a very wide exemption for the guilty whom we would all say in debate we wanted to catch. They will not be caught by subsection (1)—certainly not in 10 per cent. of the cases where even now they might be caught. It is difficult enough under Clause 54 even now no matter what is said about its all-embracing character. How many prosecutions actually take place? That is another question about the enforcement of company law.
I said I would make stick the proposition that the noble and learned Lord had changed his mind. I will only say this: Today he was all in favour of the Jenkins Committee approach to this matter, and when we come to dividends we shall see this again. But on 30th April he said about payments such as dividends—and I quote from col. 1298—
"Such payments were thought by the Jenkins Committee normally to be innocent—and I emphasise 'normally'—based on their view that the dangers arising from a company giving financial assistance were for minority shareholders and creditors only. However, the Government believe that this view is mistaken, and that to allow such a payment would undermine very much of the function of the Section 54 prohibition and the matter at which the new clause is aimed".
In that and the rest of his speech, I am sure he would accept that he did not adopt the Jenkins approach. Indeed, the Government explicitly on that occasion did not adopt it, I think correctly. We all change our minds. The noble and learned Lord referred to my change of mind. I do not think it was during, the passage of this Bill. Unless I am wrong on the record, I think it was that I once favoured a list and said on Third Reading that I had changed my mind.
To change one's mind, especially on a minor matter, is one thing; but it is another thing to change one's mind on the whole philosophy of the approach to financial assistance for the purchase of a company's shares—a matter which has been there since 1929 as a central problem of company law—and to do that in two amendments and not to explain why, or to give the general conceptual framework, but just to treat the matter as a matter of consultation with the people who want to get through the net, and who I do agree should get through the net, and not to tell us who should be caught—that is what I want to know from the Government. Who do they expect to be caught? Which of the inspectors' reports would reveal a case where this clause would create a crime, as Section 54 does now? I want to know, and I think the country has a right to know; and that is why I have spoken at some length on this and why I spoke as I did on the amendment. I think some noble Lords thought it was wrong to mention particular clauses, but the case on the amendment rested on facts of this sort that we have never had explained to us—absolutely central matters of this kind on the amendment.
The final point comes back to the words "in connection with". If you say that you must not give financial assistance, directly or indirectly, for the purpose of or in connection with the acquisition or proposed

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acquisition of shares, first, you may be talking about assistance afterwards. I agree that has been dealt with by the Government. It is a minor point and they are dealing with it in the way they suggested, in broad terms.
Secondly, it is said that it is too uncertain, but I say that the test of purpose is uncertain. Elsewhere in this clause the Government talk about the "principal purpose". Is that what they mean in subsection (1), or do they mean a minor purpose or an incidental purpose? They must know perfectly well that they are legislating litigation. The noble and learned Lord has held more briefs in his hand than I have eaten hot dinners, and he knows very well that this subsection will give rise either to nothing or to excessive litigation, and the prosecution are likely to lose. What does the word "purpose" mean, when later on they say "principal purpose"? What is a court going to make of that?
I could go on to criticise other minor points, but I do not claim to have had either the time, the energy or indeed the native ability, as I have had to go slowly through these matters, as a simple soul might try to go through a difficult, hard forest. But I would say that some parts of Amendment No. 56A are more likely to deter and catch the guilty than anything in the Commons Amendment No. 56, in subsection (1). I put to the Government: Do they not accept that to be so? I beg to move.
Moved, That the amendment to the amendment be agreed to.—(Lord Wedderburn of Charlton.)
6.25 p.m.
Lord Bruce of Donington: My Lords, if I may, I should like just to supplement the observations made by my noble friend Lord Wedderburn of Charlton. I refer in particular to subsection (1A) of Amendment No. 56 and also to subsections (2) and (2A) of Amendment No. 56. There, as my noble friend has pointed out, the words "principal purpose" have been stated. "The company's principal purpose" is referred to. Who is to determine what the company's principal purpose is? A company is a corporate entity. It has no mind; its actions take place either through the issue of documents bearing the signatures of authorised people, such as cheques, or in the case of a company's corporate action there is a resolution of its directors or of its annual general meeting. How is anybody going to determine what a company's principal purpose was? If, for example, a company at a meeting of its directors were to put into its minute book, and subsequently pass, a minute saying that, "the principal purpose of the transaction is as follows", that at the moment would appear, in the absence of evidence in rebuttal, to be conclusive evidence of what the company's principal purpose was. How else is a company's principal purpose going to be assessed?—except, as my noble friend has already pointed out, in the undoubted litigation that will arise from clauses containing ambiguities of this kind.
I invite the noble and learned Lord to contemplate actions in interpretation of these clauses that may and are more likely to arise. How does one assess what is the company's principal purpose? Can it be assessed on the basis of a collection of a whole series of facts
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from which irresistible implications or irresistible conclusions can be reached? How near is the balance to be struck—or is a board or a company resolution going to be conclusive evidence of purpose?
I hope the noble and learned Lord will be in a position to answer that; and since, at the same time as he discussed Amendment No. 56 he also discussed No. 61, may I ask him whether the Government can do a little better than describing financial assistance as "financial assistance"? This is hardly a cogent way of framing a definition clause. What about financial assistance given by way of credit, for example? Is that "financial assistance" or is it not? These two amendments, which have been spoken on very cogently by my noble friend Lord Wedderburn, are only two of the ambiguities that arise. Can the noble and learned Lord be of any further assistance on these matters when he replies to the points raised by my noble friend on the amendment he has submitted?
6.30 p.m.
Lord Lloyd of Kilgerran: My Lords, may I first thank the noble and learned Lord for the explanation he has given about the amendments to Clause 42. I must say I have considerable sympathy for the theme that has been developed so ably by the noble Lord, Lord Wedderburn. The question is whether the amendment now under these amendments to Clause 42 is too wide. My professional experience, if I may refer to a personal matter, is entirely in the field of intellectual property, involving patents, trademarks, know-how and copyright.
I have had some anxiety about Amendment No. 61, where there is a definition of "financial assistance". The noble Lord, Lord Bruce of Donington, asked whether this covers assistance by means of credit. It is quite possible in this age, which is so often called the age of science and technology, for there to be a large number of patents and trademarks available to a company. Is it possible, therefore, for a person to obtain assistance for the purpose of purchasing a share by some transaction involving the intellectual property which the company may own?
It seems to me prima facie—and I have not had the opportunity of studying this matter very carefully—that there may be a loophole there, in relation to the definition of "financial assistance" in the new amendments which the Government have now put forward. I apologise for at this late hour raising questions involving esoteric matters of patents and trademarks. But, if it were possible, I should be grateful for an answer, and no doubt there is a simple answer, because the noble and learned Lord has had more time to study these proposals than I have.
Lord Seebohm: My Lords, speaking as a banker, I naturally welcome Clause 42, as amended, very much indeed, and the death of Section 54 of the 1948 Companies Act is something for which we have all looked for very many years. What worries me about Amendment No. 56A is in connection with the financing of management buy-outs, which is now becoming extremely important.
I think that people will have seen in the press the announcement that arrangements are being made by

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the National Freight Corporation, which is a £50 million transaction and is very important indeed. I am speaking rather hypothetically, because I do not know the details at all, but it seems to me that in a case like that, where the management are having a buy-out, they also want to get as large a proportion as they can of workers in the business buying shares. It seems to me very important that they should do so. A lot of those workers will not have the cash on the nail to put down and will have to borrow money, and the obvious party to lend them that money will be the company. If Amendment No. 56A is adopted, will it make this more difficult or impossible or what would be the result? If it makes it more difficult or impossible, then I think that No. 56A is a very undesirable amendment.
6.32 p.m.
Lord Mackay of Clashfern: My Lords, the noble Lord, Lord Wedderburn, asked whom we had consulted. Our main external consultations were with the Law Society, the representatives of the banks and Finance for Industry, who have considerable experience of management buy-outs of the type to which the noble Lord, Lord Seebohm, referred. I am sure that the noble Lord, Lord Wedderburn, will have in mind that the Department of Trade has its own prosecution branch, and, of course, the Companies Inspectorate were also closely involved in these matters.
The noble Lord said that I had changed my mind, and I quite accept that I have changed my mind. Indeed, I anticipated that he would say that, which is why I said what I did earlier on. But this is a very difficult and important field, and I think that it is very justifiable to change one's mind in looking for a solution to a problem which, as the noble Lord, Lord Seebohm, has said, has been with us for a long time. The primary answer which I give to the noble Lord, Lord Wedderburn, in connection with his Amendment No. 56A is that the difference between us is that he wants, in effect, to put in "in connection with", whereas I want to keep in "the purpose".
As I see it, what our Amendment No. 56 does is to focus on what is regarded as the mischief. The mischief is that a company should give financial assistance directly or indirectly for the purpose of the acquisition of its own shares. It is that that requires to be restricted, and it is for that reason that we have used these words. We certainly consider that our clause as it stands, as amended by the Commons, carries out the requirements of the directive.
Of course, I accept that in any particular case one has to establish the purpose, and that is the present position, because Section 54 has never been an absolute offence. It is an offence which requires the establishment of what some people call mens rea—the kind of mind which intends to commit an offence. Therefore, there is nothing new in its being an offence which relates to the purpose of the transaction—
Lord Bruce of Donington: My Lords, I am grateful to the noble and learned Lord for giving way. Would he also bear in mind that Section 54 of the original Act uses not only the word "purpose" but also "or in connection with", which is the very phrase that has been used by my noble friend?
Lord Mackay of Clashfern: Yes, my Lords. I am, of course, well aware of that and that is the principal improvement on this aspect that we want to make; that instead of, as it were, drawing a bow at a venture, the old Section 54 identified in part what the mischief was, and that was when it was talking about purpose. When it came to "in connection with", it was really hitting at something which might or might not be bad, according to what its purpose was. That is the real difficulty. While "in connection with" is a phrase that does not perhaps depend so much on the individual's mind, it is capable of very wide application, and that has been one of the difficulties of Section 54 in recent cases.
A point has been made by both the noble Lord, Lord Wedderburn, and the noble Lord, Lord Bruce, about the company's principal purpose. The obvious intention of that part of subsection (2) is to give the company the opportunity of a way out of the primary liability, if it can show that its principal purpose is not. to give assistance for the purpose of any acquisition. That is the point. The question of what is the company's principal purpose is a matter of fact to be decided upon the evidence. I cannot see any other way in which anything of that kind could be done. It is a question of assessing, in all the circumstances, what is the principal purpose that the company has in mind. The noble Lord is, I am sure, familiar with the Belmont case, where the judge had to do just that. So, in order to apply any kind of law in this area, one has to apply one's mind to the facts and see whether they show to a reasonable tribunal that the principal purpose was as the company claimed it to be.
The noble Lord, Lord Wedderburn, asked me whether, if our clause applied, any cases in the inspectors' reports would have escaped. I must say that I cannot be certain that there is any case reported in the reports which would not have been caught if this clause had been in operation but which would have been caught under the old Section 54.
I come to the last point, I think, which is on the question of financial assistance. The noble Lord, Lord Bruce, said that it is not much help to say that "financial assistance" means financial assistance. If that were all that was said, I might have to agree with him, but it does not say that. Amendment No. 61 says:
"In this section "financial assistance" means (a) financial assistance given by way of gift; (b) financial assistance given by way of guarantee"
et cetera. In other words, it indicates the various methods by which financial assistance may be given, in order to indicate the scope of the phrase. It is not just a question of handing over cash. It is a question of financial assistance which may be given in the variety of ways which are reasonably exhaustively described in paragraphs (a) to (d).
I should like to end with the question put to me by the noble Lord, Lord Lloyd of Kilgerran, regarding intellectual property. Certainly financial assistance could be given by way of intellectual property. For example, supposing that, in order to assist me to buy shares, a company which held rights in an important patent gave the right in the patent to me as a gift in order that I might then derive money from it for the purpose of buying shares in the company, that would

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clearly be caught by subsection (5)(a). The particular nature of the property which is used to give the financial assistance does not determine the matter for the purpose of the clause.
In these circumstances, I would suggest to your Lordships that the clause as it is is preferable to the amendment proposed by the noble Lord and I would ask your Lordships not to accept it.
6.41 p.m.
Lord Wedderburn of Charlton: My Lords, I am grateful for the suggestions which have been made concerning this amendment. I can think of ways in which to improve it but I have not heard anything which suggests to me that the Government's subsection (1) of Clause 56 is better than I thought it was. It seems to me to be rather worse.
The debate has reaffirmed yet again how so many misconceptions cover this area. The latest fashion is to say, "We must get rid of Section 54 in order to assist management buy-outs". I agree that management buy-outs may be a very important phenomenon that one wants to assist. One does not want the statute to stand in the way. But it is dealt with perfectly simply and clearly in the exemptions of the Government's own clause. It does not need the omission of the words "in connection with"; that is, to assist management buy-outs you do not effectively have to abolish the offence of using the company's assets to acquire its shares, which is what, in practice, this clause does. You have to have exemptions which clearly allow for ordinary banking activity to be carried on. So no doubt today we must look at exemptions from the offence to see whether they include room for management buy-outs.
I suggest that these exemptions quite clearly do. In other words, the debate about the exemptions is once again being muddled up with the debate about the basic prohibition. I did not complain that the noble and learned Lord had changed his mind. I explained that I have changed my mind. I complained that whereas I was right to change mine he was wrong to change his because he has not explained up to now why he has changed his mind. I knew that the noble and learned Lord would do for us what no other Government spokesman has done. Throughout the debates I have read on this matter no other Government spokesman has said what a lawyer should say to start with: What is the mischief to be prohibited? Although I do not have his precise words, I understood the noble and learned Lord to say that the mischief to be avoided is that the company's assets must not be used for the intentional purpose of acquiring its shares. With respect, that shows why the Government have got it wrong, because that is not the only mischief to be avoided.
Although in certain respects I regard the Jenkins Report of 1962 on Company Law Amendment as rather diabolical, nevertheless I shall sup with the devil on this one. I have been looking at the Jenkins Report. I cannot make the point stick without reading paragraphs 172 to 186 of the Jenkins Report but I am sure that noble Lords would not wish me to do so. If, however, one reads paragraphs 172 to 186 one finds
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that even Jenkins—perhaps the most relaxed document on this matter in the last few decades—does not confine the mischief to be avoided only to cases of intentional application of assets for the purchase of shares. It is a little difficult, I agree, to define the area which Jenkins wanted to have covered because the report went on to procedural matters requiring a special resolution—into the area which the Government wish to apply to private companies.
I do not know of anybody who has defined the mischief so narrowly as it has been defined in this Chamber tonight. Surely in 1981 somebody is interested, apart from my noble friend Lord Bruce of Donington and I, in stopping malpractice. The Government give the impression that they do not care a fig. Surely they care whether or not there are practices where the application of the assets of the company would result in the acquisition of shares being assisted and should have been foreseen but was not. This was not the purpose of the relevant people but they really should have foreseen it because, as directors, they owe a duty to all the people who depend upon that enterprise, be they creditors, shareholders or workers, that the assets of that enterprise should be looked after with due care. Should not they be caught by this clause? Should they just be able to say, "It was not the company's purpose, nor ours: therefore that is an end of the matter?" Should they not be forced to prove that they come within an exception?
The debate tonight has shown that this is a most deplorable clause. The noble and learned Lord and I could swap many evenings discussing the finer points which I know he has not revealed and which I shall not reveal in the discussion tonight. But surely this cannot be the correct form for a Companies Act of 1981. I am utterly astonished that the noble and learned Lord has not even hinted that he has any reservations. I know that he may not be able to do that here, but one day, when he has changed his mind again, perhaps we shall see whether he really has.
All I can do is to say that I shall not withdraw this amendment. No doubt we shall not go through all the palaver of dealing with it by the ultimate deterrent. However, the amendment will not be withdrawn and I hope that it will stay on the record as an indictment of this particular part of this Companies Bill.
On Question, Amendment No. 56A, as an amendment to Commons Amendment No. 56, negatived.
As an amendment to Commons Amendment No. 56:
56B Subsection (1), line 8, leave out ("for the purpose of") and insert ("with a view to")
Lord Wedderburn of Charlton: My Lords, I can move this amendment much more quickly. It relates to exactly the same matter. I merely want to ask the Government a question. Accepting now that their subsection (1) of Clause 56 is based upon the notion of purpose, this amendment would replace "purpose" with "view to". This amendment would insert the words,
"that no financial assistance should be given with a view to the acquisition of the company's shares".
The reason that the amendment is moved is to test this one point. In Article 23 of the second directive, in the English version at least, the words

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used are that the "funds"—I do not suggest we should adopt the word "funds"—of the company should not be donated, which sounds like a bad translation, with a view to the acquisition of shares. Is it the Government's understanding that in either the English or any other version the purpose, which in English is "donation of assets with a view to the acquisition of shares", is the same as the English purpose? If the translation is correct in the sense that it is official—and I understand that the English text is an official version of the directive—then one looks at the Oxford English Dictionary and finds that the two are not quite the same. They relate to the fine tuning point that came up in the debate between the noble and learned Lord and myself on the previous amendment. If one looks at the Oxford English Dictionary, to do something "for the purpose of" (in any meaning you care to look at under the various headings) is always with the intentional object of attaining something. If, however, one looks at the word "view" and the words "with a view to" in the Oxford English Dictionary, one finds that they include both the object of attaining something and doing something with regard to something else, which sounds more like a causality without the full intent, which is always included in "purpose". Therefore the question is: Do the Government regard the two phrases as the same, and do they feel that this is justified?
In any case, why not use the words in the directive?— because of course the matter of the directive is very important so far as cost is concerned for those who depend on this. First, the courts will want to look at the directive to interpret the Act—and the Government have no doubt thought about that; so will the courts put any peculiar meaning on "purpose" in view of the different wording in the directive, such that the layman or even the legal adviser might not think of and, secondly, will the courts have the Act challenged as not according with the directive? I cannot believe that the Government have not thought of that. But the question needs to be put, and I move this amendment to the amendment with the purpose and with a view to ascertaining the Government's views. I beg to move.
Moved, That Amendment No. 56B, as an amendment to Amendment No 56, be agreed to.—(Lord Wedderburn of Charlton.)
Lord Mackay of Clashfern: My Lords, so far as we are concerned, the view—and I am sorry to use that word—that we have taken is that "for the purpose of" and "with a view to" in this context have very little difference between them. The noble Lord, referring to the dictionary, gave more than one meaning for the phrase "with a view to", but I think that the second one which he gave, "with regard to", would hardly fit the context of this phrase, and the first one is indistinguishable from the meaning "for the purpose of", which he also gave, so I think perhaps his researches confirm the result from which I said we started. As has been said, "for the purpose of" is the phrase in the existing Section 54, and up to date that does not appear to have given rise to any particular difficulty. Accordingly, for those reasons, we would wish to adhere to the phrase "for the purpose of".
Lord Wedderburn of Charlton: My Lords, I am a little disappointed in the noble and learned Lord because he has not stated on behalf of the Government that the Government feel confident that the clause accords with the directive. What he said was that there was a difference but very little difference, and if there is very little difference then what the Government are enacting is not in accordance with the directive. The Government are obliged to enact the directive. I am not making some silly point because the noble and learned Lord knows as well as I do that cases go up to the Judicial Committee of this House on points of this sort and there might be a reference to the European Court which would all be a quite unnecessary cost to people involved in commercial affairs.
This is a commercial point. It is not in any way like the previous points that I was putting to him of a fundamental kind: it is a straightforward point of approaching the directive and avoiding the pitfalls which all the wretched references to the European Court entail. I was disappointed that the noble and learned Lord did not make it clear that the Government were confident on this. If the Government are confident, I am happy, but in any case I beg leave to withdraw the amendment.
Amendment to the amendment, by leave, withdrawn.
[Amendments Nos. 56C, 56D and 56E to the amendment not moved.]
6.52 p.m.
As an amendment to Commons Amendment No. 56:
56F Leave out subsections (2) and (2A)
Lord Wedderburn of Charlton: My Lords, this amendment is to delete all the exemptions in subsections (2) and (2A). That was the first reaction of myself and, I believe, of some of my noble friends to our sight of this clause when it appeared just a week ago. Since then, one has had further thoughts, and, with your Lordships' permission, I should like with this amendment to speak also to Amendment No. 56G, which effectively gets rid of the second half of subsection (2)(a) and the equivalent, which I believe to be Amendment No. 561, which is on Clause 56(2A).
The first point on these amendments relates to the point that my noble friend Lord Bruce raised earlier, but which really must be probed yet again. The exemptions require—if we now assume that there is such a thing as an offence—that the assistance which the company has given (if I may take them in reverse order to that in which they appear in the clause) must be given in good faith in the interests of the company.
There is a subjective test of bona fides to consider the right interests—it is sometimes called a subjective test with an objective flaw. The directors, who are usually the people at issue, must consider the interests of the shareholders and now, because of the 1980 Act, they must also consider the interests of the employees and according to the latest case, more probably the interests of the creditors (which seems rather sensible). They must act in good faith in those interests on a long-term view.
Secondly—and this goes back to paragraph (a)—the purpose in giving the assistance must not be for the purpose of such acquisition of shares. That is easy, so long as one can prove the purpose. Here

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of course the difficulty of catching the crook transmutes itself into the ease with which the innocent survive, because of course as my noble friend and I suggested before, the company's purpose will be broadly stated in the evidence as that which the directors want it to be stated as; it will be difficult to go behind the evidence that comes out, both of the boardroom and of what the directors have done elsewhere, because of course, as the noble and learned Lord, Lord Denning, when he was Master of the Rolls in 1957 pointed out in the well-known case of Bolton Engineering Company v. Graham, the directors' mind and will is the mind and will of the company, as opposed to the servants and agents, who are merely hands to hold the tools, and, as in that case, the mind and will may be exercised on an informal occasion and not only in the boardroom. Nevertheless, it is what the directors are doing that will be the first evidence of the company's purpose. To go behind it and find out what was really the purpose of some of them, which may well be a hidden purpose, or what was the purpose of some other managers with whom one or two of them were in league, is very difficult indeed if one wants to catch them. But it is very easy if you want the purpose to be what you want it to be. So, heads they do not lose and tails they do not lose. They are either not guilty of the offence or they can prove the exemption, and that was the reason for striking at the whole subsection in fear that the noble and learned Lord would allow himself to be attached to the horrendous proposition that the Government's subsection (1) in Amendment No. 56 should be retained.
But in case we have to live with that and if, therefore, as a sort of consequence, we have to live with the first half, as it were, of the exemption, I have taken the other amendments with it in the hope that I am being helpful, because the other amendments relate to what I might call the second half of the first paragraph, and here we read that so long as the assistance is given in good faith in the interests of the company it is not within the prohibited area if:
"the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company".
I have discussed this matter, as indeed many other matters in these amendments, in the last four days, often late at night—and I even thought one professor of accounting was going to assault me as a member of the legislature for having such a Bill. I have not found anyone who is confident about what is meant by something which is an incidental part of a larger purpose. It does not take a lawyer to know that it is common sense for the court to use a very simple rule. If they find words in a section which say one thing, they expect those words to mean that thing, and then if later on they find slightly different words they expect the legislature to have meant something different. The judges will say, "Parliament intended…"—and that is the noble and learned Lord and me—whereas they may not have intended anything of the sort. However, they ought to look at it, and just such a case arises here.
The paragraph begins by mentioning the principal purpose and then it mentions a larger purpose. So what is envisaged is not something which is an incidental part of a principal purpose; it is something which is an incidental part of a purpose which is larger but
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not necessarily principal. How large does a purpose have to be to be larger? How do you measure the purpose of assisting the acquisition of shares against the purpose of doing something else to which it is incidental? I suppose it is arguable that the incidental part could be principal. Indeed, I know one of my colleagues who argues—he is a very good lawyer and he thinks I am quite wrong on this; I am not going to tell the noble and learned Lord what I think it means in case I have a case on it—but he thinks it means the incidental part could be principal. So I am obliged to put that to the noble and learned Lord. I think it is wrong, but he thinks it is right. He says larger need not be principal; therefore, incidental can be principal so long as the other purpose is larger in some way, larger, for example, by way of financial considerations. Is that what the Government have in mind? If not, what on earth does "larger" mean?
It really will not do to say, "Oh, well, everybody knows it is incidental to a larger purpose", for this reason; that is, that we do not normally cure crimes simply because they are incidental to some unspecified larger purpose. Indeed, it is not even said that it has got to be a lawful purpose, and in subsection (2B) we talk about "dividends lawfully paid" or words to that effect, "distributions lawfully made ". But supposing it is lawful, are the Government saying to burglars, "We have got good news and bad news: the bad news is that burglary is still a crime, but the good news is that it will cease to be a crime if it is an incidental part of a larger purpose". It would be a very silly thing to put on the statute book. With respect, I think this subsection makes a mockery of the whole business. It is one of the foundations of my proposition to the Government that they are abolishing this offence. It is not just that they are giving wide exemptions; if they enact this they are abolishing the offence.
I want to know, and many people want to know, what is meant first by the whole purpose test. Is it as easy to get through the exemption as we think? I do not object to that for banks and people like that, but I do for others. If you do not get through that way, just how easy is it to establish a larger purpose, in a courtroom where a judge has to make up his mind on a conflict of views what is meant by "larger" purpose, and where a man's legality and perhaps his freedom—because he might be put in prison for this—will depend on these words. It seems to me astonishing that a responsible legislature could enact a crime of this kind where imprisonment is a possibility at the end of the road. I think the Government must give better explanations than they have of this subsection. I beg to move.
Moved, That Amendment No. 56F, as an amendment to Commons Amendment No. 56, be agreed to. —(Lord Wedderburn of Charlton.)
Lord Mackay of Clashfern: My Lords, we are certainly not contemplating legislating on burglary in the sense that the noble Lord has suggested. What we have endeavoured to do is to legislate against what we believe to be the mischief, that is to say the giving of financial assistance for the purpose of the acquisition of a company's own shares. The defences in subsection (2) are intended to be cumulative; that is to

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say both (2)(a) and (2)(b) have both to be satisfied. It has to be given in good faith in the interests of the company, and I should have thought it reasonably clear that (a) requires that the company establish some purpose other than the giving of assistance as the main purpose or larger purpose of the transaction. If the purpose of giving assistance proves only to be incidental, then it is not caught, because it is not part of the mischief to catch purposes of that kind which are merely incidental; it must be more than a mere incidental purpose to constitute the mischief we complain of. I suggest that it would by no means preclude investigation that, for example, the directors sought to minute that (a) was their purpose if the circumstances clearly showed that (b) was their purpose. That is a difficulty which prosecutions have daily to surmount and I believe they manage to surmount it without undue difficulty. I would suggest to your Lordships that the words in the defences should remain.
Lord Wedderburn of Charlton: My Lords, if I may put two small points, I am not convinced by the noble and learned Lord. On his first point, of course it has to be established that the defendants have acted in good faith in the interests of the company, but as my noble friend Lord Bruce and I have tried to point out, these matters are easily established by defendants when they depend on the subjectivity of the matter, but are very difficult for the prosecution. It is no good the noble and learned Lord saying that, of course, we face the problem of the burden of evidence and the prosecution having to prove something every day, the question is what are the hurdles which the legislature puts up against the prosecution succeeding, and this hurdle is too low. The noble and learned Lord did not address himself to that at all.
Secondly, of course, it is correct that they must act in good faith in the interests of the company. But that is not enough. We are at one on that, but I still do not know after having heard the noble and learned Lord what the Government have in mind, except the obvious case where just by some accident it occurs that some assistance is given and it is a very small matter. But in a serious situation where it is doubtful, where is the line? I do not think anyone would be able to advise a client clearly on this matter. It is a great pity the Government chose not to spend a longer time on this. This is a perfect example of something the Government could take away and bring back and put through both Houses by Christmas, but they are not interested in doing so. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Denham: My Lords, I think this would probably be a suitable moment to adjourn for dinner. If your Lordships agree, I beg to move that further consideration of Commons amendments be now adjourned till eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.7 p.m. until 8 p.m.]
[Amendment No. 56G not moved.]
As an amendment to Amendment No. 56:
56H Subsection (2), at end insert ("but no person shall be entitled to rely upon this subsection by way of defence to civil liability under this section unless he proves that he neither had nor should have had reasonable cause to believe that the financial assistance fell outside the provisions of paragraphs (a) and (b) of this subsection")
Lord Wedderburn of Charlton: My Lords, I move Amendment No. 56H for a very simple purpose: First, to see whether we are right in assuming that the Government also assume that civil liability will arise if there is a breach of this section, just as it arises at present as an action in tort for a breach of a statute. The recent decision of the House of Lords Judicial Committee in the case of Lonrho Ltd. v. Shell suggests that. on the construction of any section, a civil action will lie in tort. That has been confirmed by the Belmont cases on Section 54. We hope that it is still true. If it is true we think that a defence to a civil action should only arise in the circumstances proposed in Amendment No. 56H. I beg to move.
Moved, That Amendment No. 56H, as an amendment to Commons Amendment No. 56, be agreed to.—(Lord Wedderburn of Charlton.)
Lord Mackay of Clashfern: My Lords, I am not at all clear what is the purpose of this amendment. So far as I can understand the situation, if the provisions of paragraphs (a) and (b) are established, then there would be no offence. Therefore. I must say that I am not quite clear what this does in the way of addition to that situation.
Lord Wedderburn of Charlton: My Lords, I am very disappointed by the noble and learned Lord's response. It should surely be clear from our amendment that it is a proviso to the subsection which says that the subsection would not apply by way of defence to civil liability unless the defendant had—and let us take the simple case—"reasonable cause to believe" that it fell outside the paragraphs, which is not within the terms of the clause as it stands. He must have "reasonable cause to believe" it. That puts an objective element into it. I am disappointed that the noble and learned Lord has not taken the occasion to confirm that civil liability will still remain after this Bill, as it has remained for many, many years in English law in relation to this offence. I shall not withdraw the amendment.
On Question, amendment to the amendment negatived.
[Amendments Nos. 561, 56J and 56K to Commons Amendment No. 56 not moved.]
As an amendment to Amendment No. 56:
56L Subsection (2A) at end insert—
("Provided that no person shall be entitled to rely upon this subsection by way of defence to civil liability under this section unless he proves that he neither had nor should have had reasonable cause to believe that the financial assistance fell outside the provisions of paragraphs (a) and (b) of this subsection.").
Lord Wedderburn of Charlton: My Lords, I beg to move Amendment No. 56L. I shall again put on record the fact that this amendment would add to the gateway out of liability the need for the malefactor to

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prove not only what is there at the moment under subsection (2A), but also the requirements of this amendment to the amendment as printed. It would add a further factor whereby the defendant would not escape quite so easily, that is, almost always, as the Government would have it. I beg to move.
Moved, That Amendment No. 56L, as an amendment to Commons Amendment No. 56, be agreed to. —(Lord Wedderburn of Charlton.)
Lord Mackay of Clashfern: My Lords, my position as regards this amendment is somewhat the same as on Amendment No. 56H. If the facts are established as bringing the case within the defence, then there is no crime and no civil liability, as I see it, and therefore I do not see the purpose of this amendment either. Therefore, I would not be able to advise your Lordships to support it.
Lord Lloyd of Kilgerran: My Lords, before the noble and learned Lord sits down, may I ask him whether there is not one difficulty about dealing with Clause 42, dealing with the malefactor; namely, that you are dealing with a criminal prosecution and therefore the necessity for proof is so much higher than in a civil matter? Would not a proviso like that put forward in Amendment No. 56L help in relation to dealing with the malefactor by explaining the position a little further? I fully realise that I am not a criminal lawyer and have not had much experience in criminal matters. However, it seems to me that there is a pretty wide exemption given by the Government amendments to this clause and, therefore, if you are dealing with criminal proceedings you want, in the course of the text of the Act or the Bill, to be more explicit in providing provisos which make it more difficult for the malefactor to get away with it.
Lord Mackay of Clashfern: My Lords, the noble Lord addresses his question to me. As I understand it, Amendment No. 56L is dealing not so much with the criminal prosecution as with the consequences for civil liability of a breach of this section. As I understand it, the noble Lord, Lord Wedderburn, wishes to add to what a person has to prove in negativing the civil liability, not only what we have in our subsection (2), but also what he has in the amendment. That is my understanding. What I do not understand is why he needs this. If in fact subsection (2) is made out, then the basic offence would not arise on the facts. Therefore, I do not see the point of this, but there may be more to it than that.
Lord Wedderburn of Charlton: Not very much, my Lords. I am gratified that the noble and learned Lord has confirmed in what he said that civil liability will remain. He had not done that previously. Secondly—and it really is very simple—if someone applies the company's assets for the purpose set out in subsection (1), he is a criminal; but he is not a criminal if he shows that he has done it in good faith as an incidental part of a larger purpose. I say, albeit that in those circumstances he is not a criminal, he ought still to be liable to a civil action unless he shows that he had no reasonable ground for thinking that
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anything else was the case. That is quite different. It is not simply the same formula all over again, but as the noble and learned Lord is still unpersuaded even as to the meaning of the amendment, I think that the best thing I can do is to beg leave to withdraw it.
Amendment to the amendment, by leave, withdrawn.
As an amendment to Amendment No. 56:
56M Subsection (2B), leave out paragraph (a).
8.8 p.m.
Lord Wedderburn of Charlton: My Lords, I beg to move Amendment No. 56M as an amendment to Amendment No. 56. This is a substantial matter. We have now come to the point regarding the offence of using the company's assets to finance a purchase of its shares, diminuative though that area of liability is; in view of the exemptions in subsection (2) and (2A), such little tiny area of offence as is remaining is given further protections. Those are set out in subsection (2B). The first of those is the exception which has been proposed by many people over the years as a total and blanket exception to the offence of assisting the purchase of shares.
Looking at paragraph (a) it says:
"any distribution of a company's assets by way of dividend lawfully made or any distribution made in the course of the winding-up"—
I am not concerned with the winding-up; this amendment is concerned with the dividend lawfully made. We say that this is too wide. It is true that I once thought that this might be possible. It is true that the Jenkins Report proposed that dividends be exempt from the offence. I think it is the case that the discussion after the Jenkins Report in 1962 has not shown in this respect that the Jenkins argument was the stronger. Indeed, the noble and learned Lord the Lord Advocate on 30th April, at col. 1298 of the Official Report, said:
"Permitting otherwise lawful dividends"
and that is what this paragraph does—
"would, for example, allow a 'predator' to borrow sufficient funds to acquire control of a cash-rich company, in the knowledge that he could then declare a lawful, substantial dividend from the assets of the company and repay funds borrowed from this dividend. This might well be an extremely undesirable commercial activity and we think that the prohibition should be able to catch it in such circumstances. The Jenkins Committee concluded that if the acquirer had to rely on the assets of the company to achieve acquisition, it was likely that the interests of minority shareholders and creditors would, at least, have been put to unacceptable risk, or that the company would have been made to part with assets for illusory consideration.
"But the objections to such activities go wider than this. Breaches of Section 54 have been significant features of many cases of asset stripping or share puffing, revealed in a series of companies inspectors' reports which have been produced over the years".
That is not just an opinion of the noble and learned Lord; those are facts, and he is right. It is astonishing that his right honourable friend, on 30th June in Committee in another place, put forward at column 300, in a passage which I shall not read but will summarise, a totally opposite point of view, except that he does not deal with the facts. He simply put forward the view that dividends should always be

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allowed to be paid so long as they fit the concept of lawful dividend. He does not deal with the point that the noble and learned Lord so rightly stressed: that this is the basis of many sorts of abuse and in report after report you find that this sort of thing is at the centre of the spider's web.
We have gone through changes of mind tonight, but this is not a change of mind. It is simply ignoring the facts. The noble and learned Lord faced them, but his right honourable friend and the Government would not, and the Government are putting forward a clause that will not face the facts. That is the first point.
If paragraph (a) of subsection (2B) is passed, that is the end of the offence because, with all the other things that have gone before—with the diminution of the offence and the widening of the gateways—if you cannot get through any of those, you pay it out of the dividend. Of course, the noble and learned Lord will say, "but only out of lawful dividend; that is, only out of profits, and in accordance with the articles of the company, of course," and so on. If he is suggesting that this does not add a further area of possible malpractice, I can only say that the Government are living in a wonderland that even Alice did not inhabit. Obviously, this would supplement the procedures whereby a company's assets could be used by those who are among the guilty and not the innocent. It is a particularly bad example of the Government moving to a defective philosophy on the matter.
Without elaborating the point, surely there is an ambiguity about the word "lawfully". It is normally suggested by Government spokesmen—as it was by the noble and learned Lord this afternoon in our earlier debate—that it just means in accordance with Part III of the 1980 Act and in accordance with the company's constitution. Does it not also mean bona fide, in the interests of the company? Is there no purpose test? Let us suppose that a dividend is lawfully paid in accordance with Part III of the Companies Act 1980 and in accordance with the articles, but that the ulterior motive is something else. Is that included or is it not? Normally one would have thought that the fiduciary obligation of the directors would apply. It has never been mentioned by Government spokesmen in debates so far. Let the noble and learned Lord mention it if that is part of the problem. In that case perhaps it would have been better to elaborate it a little more in the text. This is a paragraph that had better go. I am aware that the Government will not make it go, but we want to put on record the fact that we should not legislate like this.
Moved, That this House doth agree with the amendment to the amendment.—(Lord Wedderburn of Charlton.)
Lord Mackay of Clashfern: My Lords, I sought to cover this in explanation of our amendment and in anticipation of the noble Lord's Amendment No. 56M. As a result of our discussion and consultation. the situation is that it seems to us that the protections which are implied in the word "lawfully" are sufficient to make it proper that the proceeds of such a dividend should be applied in accordance with the wishes of the person whose dividend it is. Once the company is
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entitled to hand it out to an individual to use as he wishes, it seems perhaps to go a little far—as one views the matter now—not to allow that to be an exemption from any influence that might otherwise arise that it was under Clause 42. It is better to go for clarity in this area than to leave the matter vague, and those are some of the reasons why we now think that subsection (2B) (a) should be allowed to stand.
Lord Wedderburn of Charlton: My Lords, I beg to move.
On Question, amendment to the amendment negatived.
As an amendment to Commons Amendment No. 56:
56N Subsection (2B), line 3, leave out ("lawfully made") and insert ("made lawfully and otherwise than for the principal purpose of financial assistance rendered unlawful by those subsections").
Lord Wedderburn of Charlton: My Lords, I beg formally to move Amendment No. 56N.
Moved, That this House doth agree with the amendment to the amendment.—(Lord Wedderburn of Charlton.)
On Question, amendment to the amendment negatived.
[Amendment No. 56P, as an amendment to Commons Amendment No. 56, not moved.]
As an amendment to Amendment No. 56:
56Q Subsection (2B) at end insert—
("Provided that in each case the transaction effected or the thing done was effected or done in good faith in the interests of the company.").
8.15 p.m.
Lord Wedderburn of Charlton: My Lords, it seems reasonable to suggest that this might have been put in, or at least to ask why it was omitted. Subsection (2B) lists a large number of transactions or things done which are total exceptions from the offence of a company financing the assistance of the acquisition of its own shares, if there is still such an offence. There are paragraphs (a) to (g). It is quite true that all of them, except paragraphs (a) and (b), have some relationship to what the court will allow the company to do.
However, this amendment to the amendment would attach to the end of the list of paragraphs the general proviso that:
"the transaction effected or the thing done was effected or done in good faith in the interests of the company".
There is a doubt about whether that is so. Indeed, if I may point out to the noble and learned Lord (because we seem to have difficulty in communicating about the meaning of these amendments, so I must dwell upon this sufficiently to show him that there is meaning in the amendment), paragraph (a) speaks about "dividends lawfully made". Paragraph (b) talks about "the allotment of any bonus shares". It is perfectly possible to allot bonus shares and by a technicality to infringe some very minor proviso either of the Act or of the articles. Because the word "lawfully" is not there but is in paragraph (a) it is obviously possible to argue that some minor technicality or, indeed, perhaps something slightly more is allowed by paragraph (b).

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That may sound an unreasonable interpretation to the noble and learned Lord, but both he and I very well know that unless unreasonable interpretations are stamped on at the root of this House they can grow into great tryffids by the time they get to the appelate courts. The fact that "lawfully" is in paragraph (a) and not in paragraph (b) leads me to think that a proviso of this kind could do nothing but good.
There are two points to be made. First, the priviso is surely reasonable and, secondly, is not the wording of paragraphs (a) and (b) rather odd? Why is not "lawfully" in paragraph (b)? If it is not in paragraph (b), would not the proviso help to cure the lapse? Given longer time I think that we could have invented better amendments to the amendment, but we did not have much time. I beg to move.
Moved, That this House doth agree with the amendment to the amendment.—(Lord Wedderburn of Charlton.)
Lord Mackay of Clashfern: My Lords, we see this as a superfluous amendment. We should have thought that this condition was implied. As regards the distinction between paragraphs (a) and (b), and the word "lawfully" in paragraph (a), I think it falls to be emphasised that the distribution must be by way of dividend lawfully made. Distribution might, in fact, happen where it was not lawful. As regards the allotment of any bonus shares, that is an act which requires lawfulness for it to exist at all, so in that respect the two are different. I certainly think that this amendment should not be made, and I would so invite your Lordships to agree.
Lord Bruce of Donington: My Lords, I am very disappointed in the reaction of the noble and learned Lord to the amendment moved by my noble friend. It seems to me that the insertion of almost the identical words in subsection (2A)(b):
"the assistance is given in good faith in the interests of the company",
could equally be put in—as, indeed, the amendment proposes—at the end of subsection (2B):
"Provided that in each case the transaction effected or the thing done was effected or done in good faith in the interests of the company".
The noble and learned Lord says that that is superfluous. I wonder what grounds he has for assuming that that is superfluous. It can only be superfluous where the contents—the precise phrasing of subsection (2B)(a), (b), (c), (d), (e), (f) and (g)—are framed in such precise terms as admit of no possible doubt. I think that the noble and learned Lord would be the first to agree that at any rate some of those particular paragraphs (a), (b), (c), (d), (e), ( f ) and (g) are not phrased in completely precise terms. What therefore is the objection to the sweeping-up subsection that has been proposed by my noble friend, which is on all fours with that in (2A)(b)? There can be no objections.
I am beginning to come to the conclusion that our further discussion of these various amendments is starting to serve little purpose. The noble and learned Lord has already made up his mind in point of fact
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that all the amendments brought from another place are going to go through. He has already made up his mind that there will be no amendments accepted from this side of the House, no matter how reasonable or how necessary they may be. Add to that particular consideration the fact that we ourselves, in the circumstances I described in the Motion earlier this afternoon, have but little time to study these matters in great detail with a view to forming precise amendments of our own after due consideration of, after pondering over at some length and, if necessary, by reference to other works, the various purports of the amendments that have been laid before us, and it seems to me that further participation by the Opposition in the remaining process of this Bill is beginning to become superfluous, because not the remotest attention is going to be paid to it anyway. In the event, the ultimate result is assured by the simple machinery of the Whip.
I regret to say this because, to use the words "good faith", I am quite persuaded that noble Lords opposite are themselves acting in good faith in defending the position that their departmental brief has laid before them. I am quite sure that they are the other victims, not necessarily the conspirators or the participants, of the kind of circumstances to which I referred in the Motion that I moved in your Lordships' House earlier this afternoon. We have therefore the choice of pretending to go through each particular amendment when it is proposed by the noble and learned Lord that we should accept the Commons amendment, going through the dismal ritual, the mere charade, of pretending to discuss it on an informed basis without even the remote possibility of producing an intellectual shift or a reasoned response to argument as distinct from producing a mere repetition of what is already on the brief.
We on this side of the House do not propose further to participate in this charade. We shall therefore on this side of the House allow, as indeed the Rules of the House allow, the Government to propose their amendments and to explain them. To that, we shall give no response except formally to agree. If the noble and learned Lord and the Government consider that to be a victory for democratic legislation properly discussed, with this House performing its functions as a revising Chamber, they are welcome to that view. For our part, we do not propose to participate in this charade any longer.
We shall remain in our Benches at our seats in conformity with the tradition in order that we can obey the formal requirements that are made of us, and in order that we may see the matter through to the bitter end, but we claim no responsibility for this. In fact, we disclaim all responsibility for it. We consider that it has been forced on this House at an unreasonable time with an unreasonable time lag, and we ourselves will have nothing of it. We also express at this time the fact that none of the professional organisations which have been taken into consultation as regards these various clauses can have attributed to themselves any responsibility for the proposals, because they have not had the opportunity of examining the clauses in their final form. They have not had an opportunity of commenting on the ambiguities, the tortuousness, contained within them; the double-think that is comprised in so many of them; the leaks with

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which they are riddled. In those circumstances, the Government are welcome to their amendments.
8.26 p.m.
Lord Lloyd of Kilgerran: My Lords, I have listened carefully to what the noble Lord, Lord Bruce of Donington, has said and I wonder whether he is going to propose therefore, or whether he is suggesting, that all the rest of the amendments should be moved en bloc in order to save time, to let us all out of here much earlier than we expected? I should have liked in some cases to ask certain questions of the noble and learned Lord, because he is always helpful, as he was in his reply to me on instructions, in relation to intellectual property. It was very helpful to me in view of the example he gave on the question that I asked, which was only one aspect of a very intricate position that arises in intellectual property.
I should have liked to ask the noble and learned Lord why, on Amendment No. 56Q, he says it is superfluous. I cannot understand why he should say that, for the following reasons. I am sorry if I am taking up the time of your Lordships on this matter, but if he looks at subsection (2A)(b), there is a paragraph saying that if,
"the assistance is given in good faith in the interests of the company",
that gives an exemption. Then when you look at (2B) you have in (a) the word "lawfully", and the word "lawfully" does not appear anywhere else in the rest of the subsections. Therefore, I should have thought that, in order to clarify the situation, particularly when there are criminal proceedings involved, there should be an amendment something like No. 56Q—not perhaps the exact words—saying that, where a chap acts in good faith in the interests of the company, then it is all right. But why it should be superfluous in the circumstances of Amendment No. 56, I do not follow.
Nevertheless, if the intention of the noble Lord, Lord Bruce of Donington and the Opposition Labour Party is that the rest of the amendments can be taken en bloc, I should be very satisfied with that, because I fully realise the position of the noble and learned Lord the Lord Advocate, and there is nothing we can do to make any change in the law at the present time. I am pretty certain of that. In those circumstances I feel I should not like to waste the time of all my colleagues who are supporting me on this occasion.
Lord Bruce of Donington: My Lords, I have hesitated to make the point more forcefully because I should not wish, by suggesting that the remainder of the proceedings could be accomplished en bloc, to deprive any Member of this House in any party either on the Benches opposite or on the Liberal Benches of an opportunity to debate individual points. But it seems to me, from the considerations I have already given, which I do not propose to amplify but which the noble and learned Lord knows very well, that the purposes of the Government (which were so adequately described by the noble Lord, Lord Boyd-Carpenter, with whom I agree) are putting the House in a position where it is acting as a rubber stamp, and it might be accomplished more conveniently, more expeditiously, more efficiently, more painlessly, by moving the remainder of the
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amendments en bloc.
Lord Lloyd of Kilgerran: My Lords, may I say with leave that I do not want to be misunderstood? I do not want to say anything in the course of any of the other amendments, and I shall certainly accept the suggestion of the noble Lord, Lord Bruce of Donington, that in the circumstances we can deal with all of the rest of the amendments en bloc.
Lord Mackay of Clashfern: My Lords, first of all with leave may I seek to answer the question which has been put to me on this amendment? I sought to answer it earlier, but I shall try to answer it again. The difference from subsection (2A), in which, under (b), the phrase appears in regard to assistance having been given in good faith in the interests of the company, is that the first branch of that subsection is a general one about the company's principal purpose and so on, which we have already discussed to some extent.
So far as subsection (2B) is concerned, it is a list of specific actions on the part of the company, and in the case of distribution, emphasis is put on the need for the distribution to be lawful, because you could have an unlawful distribution. As for the allotment of bonus shares, I certainly think that an allotment, in order to be a valid allotment, would require to satisfy that criterion. And when one goes from (c) onwards, most of the matters in question are in respect of orders of the court or of action taken under statutory authority, and in all of those I should have thought this was plainly implied, and for that reason I say that Amendment No. 56Q is superfluous. Indeed, if it were made it would suggest, for example, that it would be open to the court to make an order under Section 206 of the 1948 Act otherwise than in accordance with the best interests of the company, and I am sure the noble Lord, Lord Wedderburn, would be the last to suggest that the court could competently make an order under Section 206 in those circumstances.
As for the more general matters raised by the noble Lord, Lord Bruce, I understand the issue has already been discussed. I would propose to follow the course I indicated at the outset, in moving Amendment No. 1, that I would give an explanation of the principal substantive amendments, and any noble Lord who felt inclined to ask questions would be welcome to do so and I would do my best to answer them. Accordingly, I do not propose, at least at the present juncture, to move all the rest of the amendments en bloc.
Lord Wedderburn of Charlton: My Lords, as I am still speaking to Amendment No. 56Q after that diversion, I would say two things to the noble and learned Lord, one nice and one nasty. To be nice first, it is always nice to tempt the noble and learned Lord out into real discussion, and he has just entered into some of that. It is difficult today to do that. The problem with the noble and learned Lord—this is still part of the nice remarks I am making—is that he is not here for the purpose of running the amendments through with a steamroller; he is here in connection with the operation of running the amendments through with a steamroller, and he had better realise that the one is as guilty as the other.
On the nasty side, I agree with my noble friend that it is a charade, and that is absolutely clear. I do not

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complain about the Government not accepting anything; nor do I complain that there are Whips able to defeat us every time. After all, that is everyday life in this House, until its legislative functions go, and everything that has been done tonight will, as my noble friend suggested, push that argument further. It is not that to which one objects; it is the failure to engage in real discussion. I had noted the point, "They will say it is superfluous"; but I crossed that out because if one looks at the provision which we are discussing, there is clearly an argument that is not superfluous. The noble and learned Lord knows that as well as I do—both sides can be briefed—but when he replies he does not say, "You could say it is superfluous, but on the other side you could say it is not", as he would normally say if briefed; no, he simply says, "It is superfluous", and then he must be tempted by the noble Lord, Lord Lloyd, into having a discussion.
In view of the way things have gone, I think one is right to say that the measure might as well be pushed through as quickly as possible. The only small amendment I would make, if my noble friends would bear with me, is that, if the procedures of the House allow, I would ask leave in some manner to move all my amendments formally en bloc so they may be printed in Hansard. There will be no real discussion of them, but at least that would show that Parliament had tabled before it some amendments on the matter. If that involves one of us being here to call out a set of numbers until whatever hour, I suppose that is the only way it can be done. On the other hand, if there is any other procedure, it might be more sensible to do it that way because it is clear that these amendments will not be debated. We are not withdrawing Amendment No. 56Q.
On Question, amendment to the amendment negatived.
On Question, Motion agreed to.

COMMONS AMENDMENTS
57 Clause 42, page 46, line 31, leave out ("Subsection (1)") and insert ("Subsections (1) and (1A)").
58 Clause 42, page 46, line 36, after 'scheme' insert ("within the meaning of section 87(1) of the 1980 Act)").
59 Clause 42, page 46, line 38, leave out ("by the trustees of the scheme").
60 Clause 42, page 47, line 2, leave out ("company's net assets") and insert ("company has net assets which").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 57, 58, 59 and 60 en bloc. The House will recall that I explained the purpose of these amendments.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
61 Clause 42, page 47, leave out lines 6 to 24 and insert—
("(5) In this section "financial assistance" means—

(a) financial assistance given by way of gift;

(b) financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of

Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 61.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
As an amendment to Amendment No. 61:
61A Line 2, after ("assistance") insert ("or his position in respect of any interest in property of any kind").
Lord Wedderburn of Charlton: My Lords, I beg to move formally that this House doth agree with the amendment to the amendment.
Moved, That this House doth agree with the amendment to the amendment.—(Lord Wedderburn of Charlton.)
On Question, amendment to the amendment negatived.
As an amendment to Amendment No. 61:
61B Line 2, at end insert ("or given in respect of any transfer of property not accompanied by adequate consideration;").
Lord Wedderburn of Charlton: My Lords, I beg to move formally that this House doth agree with the amendment to the amendment.
Moved, That this House doth agree with the amendment to the amendment.—(Lord Wedderburn of Charlton.)
On Question, amendment to the amendment negatived.
[Amendment No. 61C not moved.]
On Question, Motion agreed to.

COMMONS AMENDMENT
62 After Clause 42, insert the following new clause:
("Relaxation of section 42 restrictions for private companies.
.—(1) Section 42(1) and (1A) of this Act shall not prohibit a private company from giving financial assistance in any case where the acquisition of shares in question is or was an acquisition of shares in the company or, if it is a subsidiary of another private company, in that other company if the following provisions of this section and section (Provisions supplementary to section (Relaxation of section 42 restrictions for private companies)) of this Act are complied with as respects the giving of that assistance.
(2) Subsection (1) above shall authorise a company to give financial assistance to any person only if the company has net assets which are not thereby reduced, or to the extent that those assets are thereby reduced, if the financial assistance is provided out of distributable profits.
(3) Subsection (1) above shall not permit financial assistance to be given by a subsidiary in any case where the acquisition of shares in question is or was an acquisition of shares in its holding company if it is also a subsidiary of a public company which is itself a subsidiary of that holding company.
(4) Unless the company proposing to give the financial assistance is a wholly owned subsidiary, the giving of the financial assistance must be approved by special resolution of the company in general meeting.
(5) Where the financial assistance is to be given by the company in any case where the acquisiton of shares in question is or was an acquisition of shares in its holding company, that holding company and any other company which is both the company's holding company and a subsidiary of that other holding company, except, in any case, any company which is a wholly owned subsidiary, shall also approve by special resolution in general meeting the giving of the financial assistance.
(6) The directors of the company proposing to give the financial assistance and, where the shares to be acquired

983
are shares in its holding company, the directors of that company and of any other company which is both the company's holding company and a subsidiary of that other holding company shall before the financial assistance is given make a statutory declaration in the prescribed form complying with subsection (7) below.
(7) A statutory declaration made by the directors of any company in pursuance of subsection (6) above shall—

(a) contain such particulars of the assistance to be given and of the business of the company of which they are directors as may be prescribed and shall identify the person to whom the assistance is to be given;

(b) state that the directors have formed the opinion as regards its initial situation immediately following the date on which the assistance is proposed to be given, that there will be no ground on which their company could then be found to be unable to pay its debts; and either—

(i) it is intended to commence the winding up of the company within twelve months of that date, that the company will be able to pay its debts in full within twelve months of the commencement of the winding up; or

(ii) in any other case, that the company will be able to pay its debts as they fall due during the year immediately following that date.

In forming their opinion for the purposes of this subsection, the directors shall take into account any liabilities of the company which the court would be required by section 223(d) of the 1948 Act to take into account in determining for the purposes of section 222(e) of that Act (circumstances in which a company may be wound up by the court) whether the company was unable to pay its debts.
(8) Any statutory declaration made in pursuance of subsection (6) above shall have annexed to it a report addressed to the directors who made the declaration by the auditors of their company stating that they have enquired into the state of affairs of that company and are not aware of anything to indicate that the opinion expressed by the directors in the declaration as to any of the matters mentioned in subsection (7)(b) above is unreasonable in all the circumstances.
(9) Financial assistance shall not be given in pursuance of this section—

(a) where a special resolution is required by this section to be passed approving the giving of that assistance, before the expiry of the period of four weeks beginning with the date on which that special resolution is passed or where more than one such resolution is passed, the date on which the last of them is passed unless, as respects that resolution (or, if more than one, each of them) every member of the company which passed the resolution who is entitled to vote at general meetings of the company voted in favour of the resolution;

(b) where an application for the cancellation of any such resolution is made under section (Provisions supplementary to section (Relaxation of section 42 restrictions for private companies)) of this Act, before the final determination of the application, unless the court otherwise orders;

(c) after the expiry of the period of eight weeks beginning with the date on which the directors of the company proposing to give the financial assistance made the statutory declaration in pursuance of subsection (6) above, or, where that company is a subsidiary and both its directors and the directors of any of its holding companies made such a declaration, the date on which the earliest of the declarations is made, unless the court, on any such application as is mentioned in paragraph (b) above, otherwise orders.

Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 62.
Lord Wedderburn of Charlton: My Lords, I beg not to
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move the Motion that this House doth not agree with the amendment.
Lord Mackay of Clashfern: My Lords, I gather that the noble Lord, Lord Wedderburn, does not intend to move that this House doth not agree with the Commons in their Amendment No. 62, but I am not certain whether he wishes to move, as amendments to No. 62, Nos. 62A, 62B and 62C. I am moving that this House doth agree with the Commons in their Amendment No. 62 and I shall speak at the same time, with permission, to No. 63.
These amendments contain important new provisions which will complement Clause 42 as amended by enabling a private company to give financial assistance for the acquisition of its shares or those of any holding company which is also a private company, subject to appropriate safeguards for members and creditors. At first sight the provisions in these amendments may appear very far-reaching, but the general scheme of the safeguards is very much in the spirit of the approach of the Jenkins Committee and are on similar lines to those proposed in the case of a purchase by a company of its own shares. These provisions reflect the Government's recognition, in the light of representations by people who are closely and directly concerned with the development of industry and commerce in this country, that quite apart from the changes to Clause 42, it would be desirable to provide a gateway through the general prohibition, provided that adequate safeguards were incorporated, and we consider that adequate safeguards have been incorporated by the provisions in these amendments. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
As amendments to Amendment No. 62
62A Subsection (1) at end insert—
("(1A) No person shall be entitled to rely upon subsection (1) above by way of defence to civil liability under this section unless he proves that he believed and had reasonable cause to believe:

(a) that the financial assistance was given in good faith in the interests of the company; and

(b) that the assistance was given as an incidental part of a larger transaction unconnected with the acquisition of the shares in the company.").

62B Subsection (2), at the end insert ("and the assistance is given in good faith in the interests of the company and by way of a transaction effected or thing done which falls within the terms of any one of paragraphs (a) to (g) of subsection (2B) of section 42 above.").
62C Subsection (4) at end insert ("but, notwithstanding any provision in the memorandum or articles of association of the company or in any other document or agreement, no person to whom any such assistance is provided or it so be provided shall be entitled to vote upon that resolution either on a poll or otherwise, in his own right or as a proxy".).
8.40 p.m.
Lord Wedderburn of Charlton: My Lords, I beg to move formally Amendments Nos. 62A, 62B and 62C as amendments to Amendment No. 62.
Moved, That this House doth agree with the amendments to the amendment.—(Lord Charlton of Wedderburn.)
On Question, amendments to the amendment negatived.
Lord Lloyd of Kilgerran: My Lords, I draw attention to the fact that I have already spoken about Amendment No. 62, when I earlier supported the amendment of the noble Lord, Lord Bruce of Donington, and I referred to that wonderful subsection (9) with its 320 odd words. I was very disappointed when the noble Lord, Lord Renton, left the House, because I am sure that he would have supported me in making an appeal for simplification and clarification in Acts of Parliament of this kind. Here we have a clause dealing with restrictions for private companies; indeed, not only restrictions, but relaxation of restrictions. But to have a sentence, with indeed two or three semi-colons, of 320 words is really not the way in which modern law should be written these days.
On Question, Motion agreed to.

COMMONS AMENDMENT
63 Insert the following new clause:
Provisions supplementary to section (Relaxation of section 42 restrictions for private companies.
.—((1) A special resolution required by section (Relexation of section 42 restrictions for private companies) of this Act to be passed by any company approving the giving of any financial assistance must be passed on the date on which the directors of that company made the statutory declaration required by that section in connection with the giving of that assistance or within the week immediately following that date.
(2) Where any such special resolution is passed by a company, an application may be made to the court for the cancellation of that resolution—

(a) by the holders of not less in the aggregate than 10 per cent. in nominal value of the company's issued share capital or any class thereof; or

(b) if the company is not limited by shares, by not less than 10 per cent. of the company's members;

but any such application shall not be made by any person who has consented to or voted in favour of the resolution.
(3) Subsections (4) to (10) of section 11 of the 1980 Act (provisions as to applications for cancellation of resolutions to which that section applies) shall apply in relation to applications made under this section as they apply in relation to applications made under that.
(4) A special resolution passed by a company shall not be effective for the purposes of section (Relaxation of section 42 restrictions for private companies) of this Act—

(a) unless the declaration made in compliance with subsection (7) of that section by the directors of the company, together with the auditors' report annexed thereto, is available for inspection by members of the company at the meeting at which the resolution is passed;

(b) if it is cancelled by the court on an application under this section.

(5) Any statutory declaration made by the directors of any company in compliance with section (Relaxation of section 42 restrictions for private companies) (7) of this Act, together with any auditors' report annexed thereto, shall be delivered to the registrar of companies—

(a) together with a copy of any special resolution passed by the company in pursuance of section (Relaxation of section 42 restrictions for private companies) (4) or (5) of this Act and delivered to the registrar in compliance with section 143 of the 1948 Act; or

(b) where no such special resolution is required to be passed, within fifteen days after the making of the declaration.

(6) If a company fails to comply with subsection (5) above, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-fiftieth of the statutory maximum.
(7) A director of a company who makes a statutory declaration in pursuance of section (Relaxation of
986
section 42 restrictions for private companies) of this Act without having reasonable grounds for the opinion expressed in that declaration shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both; and

(b) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both.

(8) In section (Relaxation of section 42 restrictions for private companies) of this Act, "financial assistance" and "net assets" have the meaning given by subsections (5) and (5C) of section 42 of this Act respectively.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 63.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
As an amendment to Amendment No. 63:
63A Subsection (6) at end insert ("and every such officer and every director who authorised the giving of the financial assistance shall be jointly and severally liable to indemnify any person who has suffered loss by reason of the contravention of subsection (5) above".).
Lord Wedderburn of Charlton: My Lords, I formally beg to move Amendment No. 63A.
Moved, That this House doth agree with the Commons in the amendment to the amendment.—(Lord Charlton of Wedderburn.)
On Question, amendment to the amendment negatived.
On Question, Motion agreed to.

COMMONS AMENDMENT
64 Clause 43, page 47, line 38, leave out from ("are") to end of line 39 and insert ("to be redemmed or are liable to be redeemed at the option of the company or the shareholder.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 64. This amendment makes express provision enabling a company to issue shares which are redeemable at the option of either the shareholder or the company. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.]
On Question, Motion agreed to.

COMMONS AMENDMENT
65 Clause 43, page 48, line 5, after ("to") insert ("subsection (5A) below and").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 65, and at the same time I wish to speak to Commons Amendment No. 67. The purpose of these amendments is to provide that premiums on redemption may be paid out of the proceeds of a fresh issue, where the shares to be redeemed were issued at a premium, but only to the extent of the amount of the premium on issue of the shares to be redeemed, or the amount of the share premium account, whichever is the less. The amendments make a modest relaxation in the provisions of Clause 43(5)(b). I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.]
On Question, Motion agreed to.

COMMONS AMENDMENT
66 Clause 43, page 48, line 5, leave out ("section 49") and insert ("sections 49 and 54(4)").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 66, and with this amendment I wish to take Commons Amendments Nos. 107, 108 and 109. These amendments will change the remedies which are to be available against the company where the company has failed to purchase or redeem shares. At present Clause 54 provides that any general remedy which would normally be available for a breach of contract will be available against the company for failure to purchase or redeem, but that in a winding up the claim of a shareholder in respect of such failure is to be postponed to all other debts and liabilities of the company, but is to have priority over the rights of other shareholders in a winding up.
Clause 54, as amended, will provide: (a) that a company shall not be liable to pay damages in respect of a failure to purchase or redeem, but that other remedies are to be available; (b) that where a shareholder brings an action in court for specific performance of the contract of purchase or terms of redemption, no order is to be made if the company shows that it could not pay the price out of distributable profits; (c) in a winding up the shareholder may enforce the terms of the contract or the terms for redemption, provided that the due date for purchase or redemption was before the date of the commencement of the winding up, unless it is shown that the company could not at any time between the due date for redemption or purchase and the commencement of the winding up, have paid for the shares out of distributable profits. In a winding up all other debts and liabilities of the company are to be paid in priority to the purchase price and any shareholder having, under the terms of issue of his shares, rights in priority to the right to a return of capital of the shareholder seeking to enforce a contract of purchase on terms of redemption, is also to receive amounts due to him in satisfaction of his rights in priority to the payment of the purchase of redemption price. Subject to that, the purchase or redemption price is to be paid in priority to amounts due to other members in the winding up. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
67 Clause 43, page 48, line 11, at end insert:
("(5A) Where the redeemable shares were issued at a premium, any premium payable on their redemption may be paid out of the proceeds of a fresh issue of shares made for the purposes of the redemption, up to an amount equal to—

(a) the aggregate of the premiums received by the company on the issue of the shares redeemed; or

988

(b) the current amount of the company's share premium account (including any sum transferred to that account in respect of premiums on the new shares);

whichever is the less; and in any such case the amount of the company's share premium account shall be reduced by a sum corresponding (or by sums in the aggregate corresponding) to the amount of any payment made by virtue of this subsection out of the proceeds of the issue of the new shares.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 67.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
68 Clause 45, page 50, line 1, leave out subsection (4) and insert:
("(4) A company may only make an off-market purchase of its own shares in pursuance of a contract approved in advance in accordance with the following provisions of this section or under section (Contingent purchase contracts) of this Act.
(4A) The terms of the proposed contract of purchase must be authorised by a special resolution of the company before the company enters into the contract.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 68, and at the same time I wish to speak to Commons Amendments Nos. 69 to 79.
Amendment No. 79 makes a provision enabling companies to enter into contracts for an option to purchase their own shares and other contingent contracts of purchase, subject to appropriate safeguards. The other amendments are technical, consequential, or of a drafting character. The main points of substance that underlie them are the objectives of ensuring that the terms of a contract to purchase own shares are authorised prior to the conclusion of the contract and that names of members holding shares to be purchased are available to all members when the terms are to be authorised. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
As an amendment to Amendment No. 68:
68A Line 1, at beginning insert ("Subject to subsection (4) of section (Contingent purchase contracts).
Lord Bruce of Donington: My Lords, I beg to move Amendment No. 68A as an amendment to Amendment No. 68.
Moved, That this House doth agree with the amendment to the amendment.—(Lord Bruce of Donington.)
On Question, amendment to the amendment negatived.
On Question, Motion agreed to.

COMMONS AMENDMENTS
69 Page 50, line 5, leave out subsection (5) and insert:
("(5) Subject to subsection (6) below, the authority

989
conferred by any such resolution may be varied, revoked or from time to time renewed by special resolution of the company.").
70 Page 50, line 7, leave out from ("company") to ("must") in line 8 and insert ("the authority for a proposed contract of purchase conferred by any such resolution").
71 Page 50, line 9, leave out from ("expire") to end of line 11.
72 Page 50, line 14, leave out ("an off-market") and insert ("a proposed contract of").
73 Page 50, line 17, leave out ("an off-market") and insert ("a proposed contract for the").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 69 to 73 en bloc.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
74 Page 50, line 20, leave out from ("relates") to ("and") in line 25 and insert:
("exercises the voting rights carried by any of those shares in voting on the resolution and the resolution would not have been passed if he had not done so.
For the purposes of this subsection a member who holds shares to which the resolution relates shall be regarded as exercising the voting rights carried by those shares in voting on the resolution not only if he votes in respect of those shares on a poll on the question whether that resolution shall be passed but also if he votes on that resolution otherwise than on a poll.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 74.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
As an amendment to Amendment No. 74:
74A At beginning insert ("either (a)").
Lord Bruce of Donington: My Lords, I beg to move Amendment No. 74A as an amendment to Amendment No. 74.
Moved, That this House doth agree with the amendment to the amendment.—(Lord Bruce of Donington.)
On Question, amendment to the amendment negatived.
As an amendment to Amendment No. 74:
74B Line 3, at end insert—
("; or
(b) in the case of a public company exercises such voting rights in voting on the resolution being a member who has an interest in the shares which are the subject of the purchase.
In this paragraph "interest" in shares has the same meaning as in section (obligation to notify known interests in voting shares in a public company").
Lord Bruce of Donington: My Lords, I beg to move.
Moved, That this House doth agree with the said amendment to the Commons Amendment No. 74.—(Lord Bruce of Donington.)
On Question, amendment to the amendment negatived.
On Question, Motion agreed to.

COMMONS AMENDMENTS
75 Page 50, line 36, at end insert:
("Any memorandum of the terms of the contract of purchase made available for the purposes of this section must include the names of any members holdings shares to which the contract relates, and any copy of the contract made available for those purposes must have annexed to it a written memorandum specifying any such names which do not appear in the contract itself.").
77 Page 50, line 37, leave out subsection (10).
78 Page 50, line 44, leave out subsection (11) and insert:
("(11) A company may agree to a variation of an existing contract of purchase approved under this section, but only if the variation is authorised by a special resolution of the company before the company agrees to it; and subsections (5) to (9) above shall apply in relation to the authority for a proposed variation as they apply in relation to the authority for a proposed contract of purchase, save that a copy or memorandum (as the case may require) of the original contract (together with any variations previously made) must also be available for inspection in accordance with subsection (9).").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 75 to 78.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.
8.51 p.m.

COMMONS AMENDMENT
79 After Clause 45, insert the following new Clause:
("Contingent purchase contracts.
.—(1) This section applies to the purchase by a company of its own shares in pursuance of a contract relating to any of its shares—

(a) which does not amount to a contract to purchase those shares; but

(b) under which the company may (subject to any conditions) become entitled or obliged to purchase those shares;

and any such contract is referred to below in this section as a contingent purchase contract.
(2) A company may only make a purchase of its own shares in pursuance of a contingent purchase contract if the contract is approved in advance in accordance with subsection (3) below.
(3) The terms of the proposed contract must be authorised by a special resolution of the company before the company enters into the contract, and subsections (5) to (12) of section 45 of this Act shall apply in relation to the authority for a proposed contingent purchase contract and the variation of an existing contingent purchase contract respectively as they apply in relation to the authority for a proposed contract of purchase and the variation of an existing contract of purchase.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 79.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
As an amendment to Amendment No. 79:
79A Subsection (2), at end insert ("and if the directors make in advance a statutory declaration:

(a) containing particulars of the name of the member from whom the shares are to be purchased, the price to be paid, the other terms of the contract and such other particulars as may be prescribed; and

(b) stating that they have formed the opinion that the contingent purchase contract is required for the purpose of pursuing the interests of the company, giving the reasons for that opinion.

A statutory declaration required by this subsection shall be delivered to the Registrar of Companies; and subsections (6) and (7) of section (Provisions supplementary to section [Relaxation of section 42 restrictions for private companies]) shall apply to this subsection as they apply to subsection (5) of that section.").
Lord Bruce of Donington: My Lords, I beg to move.
Moved, That this House doth agree with the said amendment to the Commons Amendment No. 79.—(Lord Bruce of Donington.)
On Question, amendment to the amendment negatived.
Lord Bruce of Donington: My Lords, before we proceed to the next amendment I wonder whether we could know what has happened to Amendment No. 76, which appears to be missing. The numbering runs directly from No. 75 to No.77.
The Deputy Speaker (Baroness White): My Lords, we moved Nos. 75 to 78 en bloc. We are now dealing with Amendments Nos. 79B and 79C.
Lord Denham: My Lords, I think there is a slight quandary here because No. 76 seems to be missing from the list of amendments. I do not think it exists.
The Deputy Speaker: We are now considering Amendments Nos. 79B and 79C. Is it proposed to move those two amendments?
As amendments to Amendment No. 79:
79B Subsection (3), at end insert—
("(4) Subsection (10) of section 45 of this Act shall for the purposes of this section apply in relation to that authority with the addition after paragraph (b) of the words: "and for inspection by employees of the company both at the registered office of the company for not less than the said period and at each place from which the work of its employees is administered.".").
79C Subsection (3), at end insert—
("(4) Notwithstanding subsections (1), (2) and (3) above it shall not be lawful for a company to buy:

(a) a right to call for delivery at a specified price and within a specified time of a specified number of its relevant shares; or

(b) a right (as it may elect) to call for delivery at a specified price and within a specified time, or to make delivery at a specified price and within a specified time of a specified number of its relevant shares;

and any director of the company who authorises any such transaction shall, subject to subsection (5) below, be guilty of an offence and be liable to the same penalties as would arise if he had committed an offence under section 25 of the 1967 Act.
(5) In determining whether an offence has been committed under subsection (4) above, subsections (3) and (4) of that section shall apply to that subsection as they do to that section.
(6) In this section, "relevant shares" has the same meaning as in subsection (2)(a) of that section".).
Lord Bruce of Donington: My Lords, I beg to move.
Moved, That this House doth agree with the said amendments to the Commons Amendment No. 79.—(Lord Bruce of Donington.)
On Question, amendments to the amendment negatived.
On Question, Motion agreed to.

COMMONS AMENDMENT
80 After Clause 46, insert the following new Clause:
("Assignment or release of company's right to purchase own shares.
.—(1) The rights of a company under any contract approved under section 45 or (Contingent purchase contracts) of this Act or any contract for a purchase authorised under section 46 of this Act shall not be capable of assignment.
(2) Any agreement by a company to release its rights under any contract approved under section 45 or (Contingent purchase contracts) of this Act shall be void unless the release is approved in advance in accordance with subsection (3) below.
(3) The terms of the proposed release agreement must be authorised by a special resolution of the company before the company enters into the agreement; and subsections (5) to (12) of section 45 of this Act shall apply in relation to the authority for a proposed release agreement as they apply in relation to the authority for a proposed variation of an existing contract of purchase.").
Lord Mackay of Clashfern: My Lords, the new clause to be added by this amendment prohibits a company from assigning any of its rights under a contract of purchase authorised under Clauses 45 or 46 of this Bill or under a contingent purchase contract authorised under Amendment 79, and requires that an agreement by a company to release its rights under contracts approved under Clause 45 or Amendment No. 79 be authorised by special resolution, just as the terms of such contracts and any variation to them must be. I beg to move that this House doth agree with the Commons in their Amendment No. 80.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
Lord Bruce of Donington: My Lords, could the noble and learned Lord inform us whether this applies to companies of all kinds and not merely to PLCs?
Lord Mackay of Clashfern: This is a general clause, my Lords.
On Question, Motion agreed to.

COMMONS AMENDMENT
81 After Clause 46, insert the following new clause—
("Payments apart from purchase price to be made out of distributable profits.
.—(1) Any payment made by a company in consideration of—

(a) acquiring any right with respect to the purchase of any of its own shares in pursuance of a contract approved under section (Contingent purchase contracts) of this Act;

(b) the variation of any contract approved under section 45 or (Contingent purchase contracts) of this Act; or

(c) the release of any of the company's obligations with respect to the purchase of any of its own shares under any contract approved under section 45 or (Contingent purchase contracts) or under any contract

993
for a purchase authorised under section 46 of this Act;

must be made out of distributable profits of the company.
(2) If the requirements of subsection (1) above are not satisfied in relation to any contract—

(a) in a case within subsection (l)(a), no purchase by the company of any of its own shares in pursuance of that contract shall be lawful by virtue of this Part of this Act;

(b) in a case within subsection (1)(b), no such purchase following the variation shall be lawful by virtue of this Part of this Act; and

(c) in a case within subsection (1)(c), the purported release shall be void.").

Lord Mackay of Clashfern: My Lords, I should like to speak to Amendment No. 92 at the same time as I move Amendment No. 81. The new clause embodied in Amendment No. 81 requires that any payment made by a company in consideration of acquiring a right to purchase its own shares under a contingent purchase contract, or varying a contract of purchase, or obtaining a release from any of its obligations with respect to a purchase, must be found from distributable profits. If this requirement is not satisfied the clause makes the related purchase of shares unlawful in the case of a payment for a right to purchase or a variation, and the release of an obligation void. Amendment No. 92 is a consequential drafting amendment. I beg to move that this House doth agree with the Commons in their Amendment No. 81.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
82 Clause 47, page 52, line 14, leave out ("transferred ") and insert ("delivered").
83 Clause 47, page 52, line 18, leave out ("transferred") and insert ("delivered").
84 Clause 47, page 52, line 26, leave out ("transferred") and insert ("delivered to the company").
Lord Lyell: My Lords, I beg to move Amendments Nos. 82, 83 and 84 together. These three amendments replace references to shares being "transferred" to the company with references to their being "delivered" to the company. The use of the word "transfer" was held by some commentators to carry the implication that it would be necessary to use what we call, in our felicitous translation, an instrument of transfer to effect a purchase of own shares. The Government see no reason for company law to require an instrument of transfer in a purchase or redemption of one's own shares, and thus it will be possible under company law to effect a purchase or redemption by simply delivering share certificates against payment. I beg to move that this House doth agree with the Commons in their Amendments Nos. 82 to 84.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
85 Clause 47, page 52, line 27, leave out ("of purchase").
86 Clause 47, page 52, line 32, leave out from beginning to ("the") in line 33 and insert—
("(4) Where a company enters into any contract
994
approved under section 45 or (Contingent purchase contracts) of this Act or any contract for a purchase authorised under section 46 of this Act").
87 Clause 47, page 52, line 38, leave out from second ("the") to end of line 39 and insert ("purchase of all the shares in pursuance of the contract is completed or (as the case may be) the date on which the contract otherwise determines.").
88 Clause 47, page 53, line 26, leave out subsection (9) and insert—
("(9) The obligation of a company under subsection (4) above to keep a copy of any contract or (as the case may be) a memorandum of its terms shall apply to any variation of that contract so long as it applies to that contract.").
Lord Lyell: My Lords, on behalf of my noble and learned friend I beg to move Amendments Nos. 85 to 88. These amendments are consequential to earlier amendments to which he spoke. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
89 Clause 47, page 53, leave out lines 3 to 6 and insert "without charge—

(a) of any member of the company; and

(b) if the company is a public company, of any other person.").

Lord Lyell: My Lords, during the passage of the Bill through your Lordships' House the Government have reviewed the provisions in the Bill dealing with the inspection and provision of copies of documents. This amendment reflects our conclusion that, in the light of advice from those directly concerned with company administration, it is unnecessary to make provision for payment of any fee for the inspection of company documents. It seems that few companies bother to charge fees, where they are already empowered to do so, simply for the inspection of documents which they are obliged to keep by law for other purposes. This amendment accordingly changes subsection (5)(b) of Clause 47 so that a public company may not charge for inspection by persons other than members of the company of contracts to purchase own shares or contingent purchase contracts. Under Amendment 133 a similar situation will obtain in respect of the inspection of reports by companies of investigations into their membership and, indeed, of registers of interests in shares. I beg to move that this House doth agree with the Commons in their Amendment No. 89.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
90 Clause 49, page 54, line 15, leave out ("out of capital").
91 Clause 47, page 54, line 17, at end insert "otherwise than out of distributable profits of the company or the proceeds of a fresh issue of shares; and references below in this Part of this Act to payment out of capital are (subject to subsection (6) below) references to any payment so made (whether or not it would be regarded apart from this section as a payment out of capital)").
Lord Lyell: My Lords, with Amendments Nos. 90 and 91 I should like to speak also to Amendments Nos. 93, 94 and 95, 105, 114 and 115, and, finally,

995
Amendment No. 222. All these amendments attempt to refine the clauses which deal with purchases or redemptions out of capital without substantially changing their essential provisions. All these amendments are proposed in the light of representations to the Government that greater clarity of expression was desirable in certain key respects. The purpose of Amendments Nos. 90, 91, 105 and 114 is to revise the drafting of Clause 49 to give a clear and easily understood definition of what constitutes a payment out of capital for the purposes of the clauses relating to purchase or redemption of shares.
Amendment No. 95 is a crucial amendment. It replaces subsections (7) and (8) of Clause 49. They deal with Part III of the 1980 Act, some aspects of which were found to be difficult. We consider that a reference to the proper aspects of Part III would impose too onerous a requirement, bearing in mind that the amount of available profit spelled out there must be confirmed by the auditor under Clause 51 of the Bill. Also, Amendment No. 95 provides that the accounts by which available profits can be determined must be drawn up within the three months preceding the date of the making of the statutory declaration by the directors rather than the date of the resolution to make the payment out of capital. We hope that this is more logical, as the amount of the company's available profits must be determined before the directors can make their statutory declaration. The rest of the amendments are technical and I hope they are not complicated. I hope that the House will bear with me, and that I have given a reasonable explanation of Amendments Nos. 90 and 91.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
92 Clause 49, page 54, line 26, leave out from ("the") to end of line 27 and insert ("price of redemption or purchase").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 92. This is consequential on Amendment No. 81.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
93 Clause 49, page 54, line 38, after first ("amount") insert ("(a)").
94 Clause 49, page 54, line 40, after ("company") insert
"; and
(b) any amount representing unrealised profits of the company for the time being standing to the credit of any reserve maintained by the company in accordance with paragraph 34 of Schedule 8 to the 1948 Act (the revaluation reserve);").
95 Clause 49, page 55, leave out lines 9 to 24 and insert:
("(7) The reference in subsection (2)(a) above to available profits of the company is a reference to the company's profits which are available for distribution (within the meaning of Part III of the 1980 Act), but the question whether a company has any profits so available and the amount of any such profits shall be determined for the purposes of this section in accordance with the
996
following provisions of this section instead of in accordance with section 43 of the 1980 Act.
(8) Subject to subsection (9) below, that question shall be determined by reference to the relevant items (within the meaning of section 43 of the 1980 Act) as stated in the relevant accounts for determining the permissible capital payment for any shares under this section; and those accounts are such accounts, prepared as at any date within the period for determining the amount of that payment, as are necessary to enable a reasonable jurgment to be made as to the amounts of any of those items.
(9) For the purposes of determining the amount of the permissible capital payment for any shares under this section, the amount of the company's available profits (if any) determined in accordance with subsection (8) above shall be treated as reduced by the amount of any distributions lawfully made by the company after the date of the relevant accounts and before the end of the period for determining the amount of that payment.
The reference above in this subsection to distributions lawfully made by the company shall be read as including any financial assistance given by the company as mentioned in subsection (1)(a) or (b) of section (Supplementary provisions relating to Part III of the 1980 Act) of this Act and any payment of a description within subsection (1)(d) or (e) of that section lawfully made by the company.
(10) References in this section to the period for determining the amount of the permissible capital payment for any shares are references to the period of three months ending with the date on which the statutory declaration of the directors purporting to specify the amount of that payment is made in accordance with section 50(3) of this Act.").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 93 to 95.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
96 Clause 50, page 55, line 39, leave out from beginning to end of line 7 on page 56 and insert:
("(a) as regards its initial situation immediately following the date on which the payment out of capital is proposed to be made, that there will be no ground on which the company could then be found to be unable to pay its debts; and
(b) as regards its prospects for the year immediately following that date, that, having regard to their intentions with respect to the management of the company's business during that year and to the amount and character of the financial resources which will in their view be available to the company during that year, the company will be able to continue to carry on business as a going concern (and will accordingly be able to pay its debts as they fall due) throughout that year.").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 96. I should like to speak to Amendments Nos. 97 and 98 at the same time. The statutory declaration of solvency of the company by the directors outlined in subsection (3) is one of the cornerstones of the protection built into the provisions enabling shares to be purchased or redeemed out of capital. It is important to do everything possible to ensure that creditors' and members' interests are not prejudiced in those situations. The significance of the statutory declaration is indicated by the fact that any false declaration renders the directors liable to a criminal offence. With these considerations in mind, it is clearly im-

997
portant that there should be no doubt as to what is required in the declaration. One or two representative bodies had difficulty with the wording in the Bill as it left this House. The purpose of Amendment No. 96 is accordingly to clarify Section 50(3). I believe that it will be more easily understood than the original version, and I commend it to this House.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
Lord Bruce of Donington: My Lords, I have a question to ask on this. It occurs to me not as a result of any profound study but because I have to read through these things while the noble Lord speaks on them. At line 5 of Amendment No. 96 one sees the phrase, "there will be no ground". How can anybody say that there will be no ground? Anything might happen. A bomb might drop on them. Surely the noble Lord would be advised even at this late stage without prompting by me to insert the word "reasonable" before the word "ground", which puts it on a firm legal footing. As to the ridiculous "no ground," nobody can guarantee that there will be no ground.
Lord Lyell: My Lords, if the noble Lord looks at the bottom of page 55 of the Bill, starting on line 34, he will find the words,
"The directors of the company … have formed the opinion … that there will be no ground …"
I think the amendment is supposed to be tacked on. We are taking out line 39 onwards. I think it reasonable to suppose that we are discussing the directors' opinion that there is no ground. I think that that opinion could not foresee everything foreseen (or perhaps not foreseen) by the noble Lord, Lord Bruce. That would not cover bombs, et cetera!
Lord Bruce of Donington: My Lords, I am obliged and indebted for the noble Lord having drawn my attention to the earlier part of the clause. Would the noble Lord oblige me by defining somewhere in the Bill what he means by "going concern" in subsection (b) of the same amendment? I do not find "going concern" defined anywhere.
Lord Lyell: My Lords, I suspect that, as always, the noble Lord doth tempt me. May I, on this occasion, see whether there is a clearer definition and perhaps write to him on this particular point?
Lord Davies of Leek: My Lords, it is obscure. I used to hear at an auction "Going, going, gone!" Does it mean that?
As an amendment to Commons Amendment No.96:
96 A Paragraph (b), line 4, after ("business") insert ("(which must be described in the declaration)").
Lord Bruce of Donington: My Lords, I beg formally to move Amendment No. 96A as an amendment to Commons Amendment No. 96.
Moved, That this House doth agree with the amendment to the amendment.
On Question, amendment to the amendment negatived.
On Question, Motion agreed to.

COMMONS AMENDMENTS
97 Clause 50, page 56, line 15, after ("must") insert ("be in the prescribed form and contain such information with respect to the nature of the company's business as may be prescribed, and must in addition").
98 Clause 50, page 56, line 26, leave out ("(a) to (c)").
Lord Lyell: My Lords, I spoke to these amendments when I was moving Amendment No. 96 and I beg to move them en bloc.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
99 Clause 50, page 56, line 28, at end insert ("on or").
Lord Lyell: My Lords, I beg to move Amendment No. 99, and at the same time I wish to speak to Amendment No. 101. Amendment No. 99 seeks to remove any uncertainty as to whether the special resolution of the company which authorises payment out of capital for a purchase or for a redemption of the company's own shares may be passed on the same day as the associated statutory declaration which has to be made by the directors. At the moment the clause requires the resolution to be passed within one week of the date of the declaration. The amendment makes it clear that the two may happen on the same day, because this may be more convenient for companies; for example, by avoiding the need for directors to meet on two different days within the one week.
The purpose of Amendment No. 101 is to ensure that members of the company are able to see and indeed to inspect the directors' statutory declaration and also the auditors' report before they vote on the special resolution. This would enable members to check that the statutory requirements of Clause 50 have been complied with. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
100 Clause 50, page 56, line 38, leave out from ("relates") to ("and") in line 43 and insert ("exercises the voting rights carried by any of those shares in voting on the resolution and the resolution would not have been passed if he had not done so.
For the purposes of this subsection a member who holds shares to which the resolution relates shall be regarded as exercising the voting rights carried by those shares in voting on the resolution not only if he votes in respect of those shares on a poll on the question whether that resolution shall be passed but also if he votes on that resolution otherwise than on a poll;").
Lord Mackay of Clashfern: My Lords, I have already spoken to this amendment and I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
101 Clause 50, page 57, line 2, at end insert:
("17A) Any such resolution shall not be effective for the purposes of this section unless the statutory declaration

999
and auditors' report required by this section are available for inspection by members of the company at the meeting at which the resolution is passed.").
Lord Lyell: My Lords, I have just spoken to this amendment and I beg to move.
Moved, That this House cloth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
102 Clause 50, page 57, line 4, leave out from ("section") to ("shall") in line 5 and insert ("without having reasonable grounds for the opinion expressed in that declaration").
Lord Lyell: My Lords, this amendment revives the drafting of the first part of paragraph (8) of Clause 50. As drafted at the moment it is an offence for a director to make a declaration knowing it to be false or misleading, or without reasonable cause to believe in its truth. Since the main provision of the statutory declaration concerns expressions of opinion by the directors, to refer to the declaration as being "false" and to the "truth" of the declaration is singularly inappropriate. The amendment will provide that there is a criminal sanction for making a statutory declaration without having reasonable grounds for expressing that particular opinion. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.
9.12 p.m.

COMMONS AMENDMENTS
103 Clause 51, page 58, line 9, leave out from ("shall") to first ("the") in line 10 and insert ("be kept at the company's registered office throughout").
104 Clause 51, page 58, line 12, leave out from ("capital") to ("creditor") in line 13 and insert ("and shall during business hours on any day during that period be open to the inspection of any member or").
Lord Lyell: My Lords, I beg to move Amendments Nos. 103 and 104 together. These two amendments relate to the requirement in Clause 51 for the inspection of the statutory declaration by the directors and also the auditors' report. Amendment No. 103 provides that they should be kept for inspection at the registered office of that company, which of course is the normal and proper place for such documents to be kept. Amendment No. 104 provides that the declaration and report should be open to the inspection of members as well as of creditors. I beg to move.
Moved. That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
105 Clause 53, page 59, line 31, leave out from ("shares") to ("referred") in line 32.
Lord Lyell: My Lords, this was one of the many amendments to which I spoke when moving Amendment No. 90. It is consequential and I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
106 Clause 53 Page 59, line 36, leave out ("and by its debtors").
Lord Lyell: My Lords, this amendment seeks to remove the phrase,
"and by its debtors".
from paragraph 2 of Clause 53, since the term,
"the aggregate of the amount of its assets",
will already include the amounts paid by its debtors. For this reason the phrase is superfluous. It is a drafting amendment but it is one that I hope will make the Bill much clearer. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
107 Clause 54, page 60, leave out from beginning of line 39 to end of line 30 on page 61 and insert:
("(1) Where on or after the appointed day a company—

(a) issues shares on terms that they are or are liable to be redeemed; or

(b) agrees to purchase any of its own shares;

the following provisions of this section shall apply in relation thereto.
(2) A company shall not be liable in damages in respect of any failure on its part to redeem or purchase any of the shares.
(3) Subsection (2) above is without prejudice to any right of the holder of any of the shares other than his right to sue the company for damages in respect of its failure; but the court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the cost of redeeming or purchasing the shares in question out of distributable profits.
(4) Where the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased then subject to the following provisions of this section the terms of redemption or purchase may be enforced against the company; and when shares are redeemed or purchased under this subsection they shall be treated as cancelled.
(5) Subsection (4) above shall not apply if—

(a) the terms of redemption or purchase provided for the redemption or purchase to take place at a date later than the date of the commencement of the winding up; or

(b) during the period beginning with the date on which the redemption or purchase was to have taken place and ending with the commencement of the winding up the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.

(6) There shall be paid in priority to any amount which the company is liable by virtue of subsection (4) above to pay in respect of any shares—

(a) all other debts and liabilities of the company (other than any due to members in their character as such);

(b) if other shares carry rights whether as to capital or as to income which are preferred to the rights as to capital attaching to the first mentioned shares, any amount due in satisfaction of those preferred rights;

but, subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.").
108 page 61, line 37, leave out ("(5)") and insert ("(6)").
109 page 61, line 37, leave out lines 38 and 39.
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their said Amendments Nos. 107, 108 and 109. These amendments are consequential on an amendment I moved earlier.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
Lord Bruce of Donington: My Lords, before we part with Amendment No. 107, I should be grateful if the noble and learned Lord could elucidate one small problem for me that occurs as a result of my recent reading of Amendment No. 107. Had I had an opportunity of studying it earlier I might have added more observations. If the noble Lord will refer to subsections (2) and (3) he will see:
"(2) A company shall not be liable in damages in respect of any failure on its part to redeem or purchase any of the shares.
(3) Subsection (2) above is without prejudice to any right of the holder of any of the shares other than his right to sue the company for damages in respect of its failure;".
which is a right already denied it under subsection (2). Would he kindly explain that?
Lord Mackay of Clashfern: Yes, my Lords. The purpose of subsection (2) is to prevent the remedy of damages for reasons which I explained earlier, because it would mean that this shareholder would have a priority over others in a liquidation. What subsection (3) is saying is that subsection (2), cutting off the right of damages is without prejudice to the other rights to enforce the contract that the shareholder has.
Lord Wedderburn of Charlton: My Lords, perhaps the noble and learned Lord could add a little more. Are we to understand that the word "damages", which is excluded, does or does not include compensation for breach of equitable obligations, other types of compensation in restitution or remedies of that kind?
Lord Mackay of Clashfern: My Lords, the intention is to exclude rights of action for damages for breach of the contract, the contract being the contract for the redemption or purchase of the shares. It is that right of action which is excluded.
On Question, Motion agreed to.
9.11 p.m.

COMMONS AMENDMENT
110 After Clause 54, insert the following new clause:
("Supplementary provisions relating to Part III of the 1980 Act.
—. (1) For the purposes of determining by reference to any particular accounts whether any proposed distribution may be made in accordance with section 43 of the 1980 Act (determination of amount of distributable profits) subsection (7) of that section (reduction of distributable profits by amount of earlier distributions) shall apply if it would not otherwise to—

(a) any financial assistance lawfully given by a public company out of its distributable profits in any case where the assistance is required to be so given by section 42(4) of this Act;

(b) any financial assistance lawfully given by a private company out of its distributable profits in any case where the assistance is required to be so given by section (Relaxation of section 42 restrictions for private companies) (2) of this Act;

1002

(c) any financial assistance given by any company in contravention of section 42 of this Act in any case where the giving of that assistance reduces the company's net assets or increases its net liabilities;

(d) any payment made by any company in respect of the purchase by the company of any shares in the company except any payment lawfully made otherwise than out of distributable profits; and

(e) any payment of a description specified in section (Payments apart from purchase price to be made out of distributable profits) of this Act;

being financial assistance given or payment made since those accounts were prepared, as if any such financial assistance or payment were a distribution already made in pursuance of a determination made by reference to those accounts.
(2) Section 44 of the 1980 Act (consequences of unlawful distributions) shall not apply in relation to—

(a) any financial assistance given by any company in contravention of section 42 of this Act; or

(b) any payment made by a company in respect of the redemption or purchase by the company of any shares in the company.

(3) In this section—
"financial assistance" has the meaning given by section 42(5) of this Act;
"net assets" has the meaning given by section 42(5C) of this Act; and
"net liabilities" in relation to the giving of financial assistance by any company means the amount by which the aggregate amount of the company's liabilities (within the meaning of section 42(5C)(b) of this Act) exceeds the aggregate amount of its assets taking the amount of the assets and liabilities to be as stated in the company's accounting records immediately before the financial assistance is given.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 110. The new clause proposed n his amendment clarifies how Part III of the 1980 Act, which regulates distributions by companies, is to apply in relation to financial assistance given by a company for the acquisition of its shares or payments made by a company in respect of a purchase or redemption of its own shares. Section 43(7) of the 1980 Act requires a company to take into account any previous distributions made since accounts were prepared in determining, by reference to those accounts, whether any subsequent distribution would be lawful. The new clause provides, in subsection (1), that financial assistance given by a company for the purpose of the acquisition of its shares, whether lawfully under those subsections of Clause 42 and Amendment No. 62 which require the assistance to be provided out of distributable profits, or unlawfully in contravention of Clause 42 if the assistance reduces net assets or increases net liabilities; any payment made by a company for the purchase of its own shares, except a payment lawfully made from capital reserves or unrealised profits; and any payment made by a company for an option to purchase its own shares, or for a variation of or release from a contract of purchase, is to be treated as a previous distribution for the purposes of Section 43(7) of the 1980 Act.
Secondly, the new clause disapplies Section 44 of the 1980 Act, which makes provision for civil consequences of an unlawful distribution, for both financial assistance given in contravention of Clause 42 and any payment made by a company in respect of redemption or purchase of its own shares.
Moved, That this House doth agree with the Com-

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mons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
111 After Clause 54, insert the following new Clause:—
("Power to alter certain provisions with respect to redemption or purchase by a company of its own shares
.—(1) The Secretary of State may by regulations made by statutory instrument modify the provisions of this Part of this Act with respect to any of the following matters—

(a) the authority required for a purchase by a company of any of its own shares;

(b) the authority required for the release by a company of its rights under any contract for the purchase of its own shares or any contract under which the company may (subject to any conditions) become entitled or obliged to purchase any of its own shares;

(c) the information to be included in any return delivered by a company to the registrar of companies in accordance with section 47(1) of this Act;

(d) the matters to be dealt with in the statutory declaration of the directors required by section 50 of this Act with a view to indicating their opinion of their company's ability to make a proposed payment out of capital with due regard to its financial situation and prospects; and

(e) the contents of the auditor's report required by that section to be annexed to that declaration.

(2) The Secretary of State may also by regulations so made make such provision including provision by way of modifying the provisions of this Part of this Act as appears to him to be appropriate—

(a) for wholly or partly relieving companies from the requirement under section 49(2)(a) of this Act that any available profits must be taken into account in determining the amount of the permissible capital payment for any shares under that section; or

(b) for permitting a company's share premium account to be applied, to any extent appearing to the Secretary of State to be appropriate, in providing for the premiums payable on the redemption or purchase by the company of any of its own shares.

(3) Regulations under this section—

(a) may make such further modifications of any provisions of this Part of this Act as appear to the Secretary of State to be reasonably necessary in consequence of any provision made by any such regulations by virtue of subsection (1) or (2) above;

(b) may make different provision for different cases or classes of case; and

(c) may contain such further consequential provisions, and such incidental and supplementary provisions, as the Secretary of State thinks fit.

(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.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 111. The new clause in this amendment provides a power for the Secretary of State to modify by statutory instrument certain provisions of the Bill relating to various aspects of redemption or purchase by a company of its own shares. These concern the authority required for a purchase or for a release by a company of its rights under a contract of purchase; the information relating to purchases to be disclosed to the registrar of companies; the content of the statutory declaration to be made by the directors when a private company wishes to reduce capital in a purchase and of the associated auditors' report; and possible relief from the require-
1004
ment to deplete available profits before having recourse to capital and from restrictions imposed upon the use of share premium account in paying for premium on redemption or purchase. Provision is also made for consequential modifications and for different provisions for different cases. Any regulation is to be subject to Affirmative Resolution in each House. This clause was brought forward by the Government in response to a request to that effect from the Opposition in another place.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
Lord Bruce of Donington: My Lords, this will be the last intervention I shall be making on this part of the Bill. Therefore, may I say that I am not wholly satisfied with the advice that was offered to the Government in another place by the Opposition in another place. We have the right, like the Conservative Party opposite, as we recently experienced. We are a broad church in which there can be a variety of opinion and, just as there are divisions in the noble Lord's party which have been so obvious in recent days, so we have slight differences of technical opinion in my own.
I regard it as highly dangerous that the Secretary of State should be empowered in this Bill to make recommendations of such a broad character. One of the curses of professional life over the last 15 or 20 years in particular has been the proliferation not only of legislation but of regulations which impose on practising accountants, solicitors and professional men of all kinds, including industrialists, a considerable burden. Far better have it in the Act; but what the noble and learned Lord is really saying is that there are certain sections of this Bill which when it becomes an Act he has a suspicion that he may have to be extremely flexible about. Therefore he seeks to take powers to make regulations.
Regulations have one disadvantage of which we are all well aware. If in the form of a statutory instrument, they cannot be amended. They can only be objected to as a whole or accepted as a whole. Therefore, that procedure in itself lacks flexibility. On the whole, in the light of the desire of Her Majesty's Government to rush into permanent print so many statutes affecting companies, I am of the view that it would be wise for them to stick to that procedure so that what they in fact enact can be subject to detailed examination not only by another place but by this House. I regard with some misgiving this general power.
There are other reasons too. I have a suspicion that the noble and learned Lord knows quite well that all these particular parts of the Bill relating to the reduction of capital and the purchase of shares have very wide taxation implications. In fact, as he will be well aware, the Commissioners of Inland Revenue issued a consultation document in September—that was before this amendment was put down, because it was put down only on Report stage long after the end of September—in which they asked for the views of the professions generally on the particular reduction of capital proposals that were incorporated in the Bill as it then stood. The noble and learned Lord will be

1005
well aware that there are implications for capital gains tax, for capital transfer tax and for other taxation as the result of a distribution or a disposal occurring within the meaning of the Income Tax Act 1970 and the Capital Gains Tax Act of 1979. Therefore there is bound to be some relationship between taxation law and company law. Incidentally, it is one of the reasons why, in our view, this Bill should have been postponed, or at any rate these particular parts of it, until such time as the consultation called for by the Commissioners of Inland Revenue had in fact occurred.
The Inland Revenue put a deadline of, I think, 10th November, and the consultations have not yet occurred. Therefore, the noble and learned Lord must know that these are matters of some ambiguity, and I wonder whether it is for that reason that this Amendment No. 111 has been proposed, whereby there is some flexibility now so that various exigencies may have to be incorporated in the 1982 Finance Act or in such earlier Budget as his right honourable friend the Chancellor of the Exchequer may feel constrained to bring forward this November in order that they can deal with the economic crisis of their own creation. This is what will happen. This is why they want a certain amount of flexibility. We on this side of the House—and we pay due deference to the observations that were made by our colleagues in another place, who were also operating under conditions of great stress—much prefer that the right to amend over this wide field by regulation by statutory instrument is not put into the Bill, and we shall therefore be very much against it.
Lord Mackay of Clashfern: My Lords, I explained that this clause was put forward in response to suggestions made by Opposition spokesmen in another place. I must say I think it unlikely that the principal purpose that those Opposition spokesmen had in putting forward these suggestions was what the noble Lord, Lord Bruce, has specified. We accepted these suggestions with the view that it would make for a better company code as a whole if there was a limited flexibility of this kind in it. Accordingly, I commend this amendment to your Lordships.
On Question, Motion agreed to.

COMMONS AMENDMENT
112 Page 61, line 40, leave out Clause 55.
9.26 p.m.
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 112.
This amendment proposes the deletion of Clause 55 from the Bill. The clause prevents any company with power to alter its memorandum or articles so as to require the transfer of a share to the company or any other person from exercising such a power in relation to any share allotted before such an alteration is made, subject to two exceptions. First, a company may exercise such a power with the consent of the Secretary of State. Secondly, a company is permitted to take a power of pre-emption requiring a member proposing to transfer shares to offer them first to the company or another member on the same or more favourable terms as those of the proposed transfer.
1006
The clause has been the subject of continuing consultations with outside bodies during the passage of the Bill, like so many of the other clauses both on the need for it in principle and on the difficulties of drafting satisfactorily an exception for powers of pre-emption, while preserving the basic safeguard for shareholders against compulsory purchase of shares which the clause is intended to provide. In the light of the further comments received since Committee stage in the other place, the Government have concluded on balance, that the clause should best be deleted. My Lords, I beg to move.
Moved, That the House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
113 Clause 56, page 62, line 19, leave out from "( to") to end of line 22 and insert:
("the making of any payment or the giving of any financial assistance (within the meaning of section 42(5) of this Act) by any company, means those profits out of which it could lawfully make a distribution equal in value to that payment or assistance, including in any case where the financial assistance is or includes a non-cash asset (within the meaning of section 87 of the 1980 Act) any profit which, if the company were to make a distribution of that asset, would by virtue of section 43A of the 1980 Act (distributions in kind) be available for that distribution;
"distribution" has the meaning given by section 45(2) of the 1980 Act; and").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 113. This amendment amends the definition of "distributable profits" provided in Clause 57 for the purposes of Part III of the Bill and provides an additional definition of "distribution". The amendment has the effect of ensuring that all of the provisions of Part III of the 1980 Act, which determine the legality of a distribution, apply to any payment in connection with a purchase or redemption of own shares or any financial assistance which is required by the Bill to be paid out of distributable profits. My Lords, I beg to move.
Moved, That the House doth agree with the Commons in the said amendment. (Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
114 Clause 56, page 62, line 24, at end insert ("and references to payment out of capital shall be construed in accordance with section the 1980 Act; and").
115 Clause 56, page 62, line 40, leave out from ("profits") to end of line 44.
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 114 and 115. These amendments are consequential on Amendment No. 90. My Lords, I beg to move.
Moved, That the House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
116 Clause 56, page 62, line 45, leave out subsection (4).
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 116. I should also like to speak to Amendment No. 172. Amendment No. 172 ensures that, where appropriate, the provisions of the Bill which are applicable to public companies and companies other than private companies apply also to old public companies within the meaning of Section 8 of the Companies Act 1980. Amendment No. 116 is consequential on that. My Lords, I beg to move.
Moved, That the House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
117 After Clause 56, insert the following new clause:
("Obligation to notify known interests in voting shares in a public company.

COMMONS AMENDMENTS

  DISCLOSURE OF INTERESTS IN SHARES
  Disclosure of interests in voting shares in public companies
  .—(1) Where a person either—

  (a) to his knowledge acquires any interest in shares comprised in relevant share capital of a public company or ceases to be interested in any shares so comprised (whether or not he retains any interest in other shares so comprised); or

  (b) becomes aware that he has acquired any interest in shares so comprised or that he has ceased to be interested in any shares so comprised in which he was previously interested;

  he shall be under an obligation to make to the company the notication with respect to his interest in shares so comprised required by subsection (5) below in any case within subsection (2) below.
  (2) That obligation arises where either—

  (a) he has an interest subject to the notification requirement under this section in shares comprised in the share capital in question immediately after the relevant time but did not have such an interest immediately before that time; or

  (b) he had an interest subject to the notification requirement under this section in shares comprised in that share capital immediately before the relevant time but does not have such an interest immediately after that time; or

  (c) he has an interest subject to the notification requirement under this section in shares comprised in that share capital both immediately before and immediately after the relevant time but the percentage levels of his interest immediately before and immediately after that time are not the same.

  (3) A person has an interest subject to the notification requirement under this section in relevant share capital of a public company at any time when he is interested in shares comprised in relevant share capital of any such company of an aggregate nominal value equal to or more than the percentage of the nominal value of that share capital which is for the time being the notifiable percentage under this section; but all facts relevant to determining for the purposes of this section whether a person has such an interest at any time (or the percentage level of his interest) shall be taken to be what he knows them to be at that time.
  (4) Where otherwise than in circumstances within subsection (1) above a person—

  (a) is aware at the time when it occurs of any change of circumstances affecting any fact relevant to the application of the notification requirement under this section in relation to any existing interest of his in shares comprised in a company's share capital of any description; or

  1008

  (b) otherwise becomes aware of any such fact (whether or not arising from any such change in circumstances);

  he shall be under an obligation to make to the company the notification with respect of his interest required by subsection (5) below in any case within subsection (2)(a) above.
  (5) A notification required by this subsection with respect to a person's interest (if any) in shares comprised in relevant share capital of a public company must be in writing and must specify the share capital to which it relates; and any such notification must also either—

  (a) state the number of shares comprised in that share capital in which the person making the notification knows he was interested immediately after the time when the obligation to make the notification arose; or

  (b) in any case where the person making the notification no longer has an interest subject to the notification requirement under this section in shares comprised in that share capital, state that he no longer has such an interest.

  (6) A person's obligation to make any such notification must be performed within the period of five days next following the day on which that obligation arises.
  (7) Subject to the qualification mentioned below, in subsection (2)(c) above "percentage level" means the percentage figure found by expressing the aggregate nominal value of all the shares comprised in the share capital there mentioned in which the person in question is interested immediately before or (as the case may be) immediately after the relevant time as a percentage of the nominal value of that share capital and rounding that figure down, if it is not a whole number, to the next whole number.
  Where the nominal value of that share capital is greater immediately after the relevant time than it was immediately before that time the percentage level of his interest immediately before (as well as immediately after) that time shall be determined by reference to the larger amount.
  (8) The reference in subsection (3) above to the percentage which is for the time being the notifiable percentage under this section is a reference to five per cent. or such other percentage as may from time to time be prescribed for the purposes of this section by regulations under section (The prescribed percentage) of this Act.
  (9) References in subsections (2) and (7) above, as they apply in relation to any person's interest, to the relevant time are references to the time of the event or change of circumstances relevant for the purposes of subsection (1)(a) or (4)(a) above or the time when he acquired the knowledge relevant for the purposes of subsection (1)(b) or (4)(b) above (as the case may require).
  (10) For the purposes of this Part of this Act "relevant share capital", in relation to any public company, means issued share capital of that company of a class carrying rights to vote in all circumstances at general meetings of the company; and it is hereby declared for the avoidance of doubt that the temporary suspension of voting rights in respect of shares comprised in issued share capital of a public company of any such class does not affect the application of this Part of this Act in relation to interests in those or any other shares comprised in that class.".
  118 After Clause 56, insert the following new clause:
  ("The prescribed percentage.
  .—(1) The Secretary of State may by regulations made by statutory instrument from time to time prescribe the percentage to apply in determining whether a person's interest in any shares in a company is subject to the notification requirement under section (Obligation to notify known interests in voting shares in a public company) of this Act, and different percentages may be so prescribed in relation to companies of different classes or descriptions.
  (2) Where in consequence of any reduction in the percentage applicable for the purposes of that section made by regulations under this section a person's interest in relevant share capital of any public company becomes an interest subject to the notification requirement under

  1009
  that section, he shall be under an obligation to make to the company the notification with respect to his interest required by subsection (5) of that section.
  (3) Subsection (6) of that section shall not apply in any such case, but a person's obligation to make any notification under that section by virtue of this section must be performed within the period of ten days next following the day on which that obligation arises.
  (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.").
  119 After Clause 56, insert the following new clause:
  ("Obligation to notify particulars of registered ownership of voting shares in a public company.)
  .—(1) A notification under section (Obligation to notify known interests in voting shares in a public company) of this Act with respect to a person's interest in relevant share capital of a public company (other than one stating that he no longer has an interest subject to the notification requirement under that section in shares comprised in that share capital) shall include particulars of—

  (a) the identity of each registered holder of any shares to which the notification relates; and

  (b) the number of those shares held by each such registered holder;

  so far as known to the person making the notification at the date of the notification.
  (2) A person who has an interest in shares comprised in relevant share capital of a public company which is subject to the notification requirement under section (Obligation to notify known interests in voting shares in a public comapny) of this Act shall be under an obligation to notify the company in writing—

  (a) of any such particulars in relation to those shares as are mentioned in subscription (1) above; and

  (b) of any change in any such particulars;

  of which in either case he becomes aware at any time after any interest notification date and before the first occasion following that date on which he becomes subject to any further obligation to make any notification under that section with respect to his interest in shares comprised in that share capital.
  (3) The reference in subsection (2) above to an interest notification date, in relation to any person's interest in shares comprised in relevant share capital of a public company, is a reference to either of the following, that is to say—

  (a) the date of any notification made by him with respect to his interest under section (Obligation to notify known interests in voting shares in a public company) of this Act; and

  (b) where he has failed to make any such notificatino, the date on which the period allowed under this Part of this Act for making that notification came to an end.

  (4) A person who at any time has an interest in shares comprised in relevant share capital of a public company which is subject to the notification requirement under section (Obligation to notify known interests in voting shares in a public company) of this Act shall be regarded for the purposes of subsection (2) above as continuing to have an interest in those shares subject to that requirement unless and until he becomes subject to an obligation to make a notification under that section stating that he no longer has such an interest in those shares.
  (5) A person's obligation to make a notification required by this section must be performed within the period of five days next following the day on which that obligation arises.
  Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 117 to 119 en bloc.
  These amendments insert the clause which replaces the main provisions of Section 33 of the 1967 Act, as amended by Section 26 of the 1976 Act and defines the basic obligation of any person with an interest in 5 per cent. or more of any class of voting shares in a
  1010
  public company to notify the company of that fact and of significant changes of his interest above that level.
  Earl St. Aldwyn: My Lords, before the Question is put, may I raise a point of order?
  The Deputy Speaker (Lord Drumalbyn): May I first put the Question in the normal way? The Question is that Commons Amendments Nos. 117 to 119 be agreed to en bloc.
  Earl St. Aldwyn: My Lords, it is, I always understood, customary in this House that when amendments are moved, en bloc, even Commons Amendments, the leave of the House is asked for. I have noticed a total absence of that custom during the passage of the Bill this evening. I do hope that we can revert to our normal custom.
  The Deputy Speaker: My Lords, I am most grateful to the noble Earl. I shall try to adhere to that custom.
  Lord Trefgarne: My Lords, I stand quite properly corrected by my noble friend. With the leave of the House, I beg to move Commons Amendments Nos. 117 to 119 en bloc.
  Moved, That this House doth agree with the Commons in the said amendments. (Lord Trefgarne.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  120 After Clause 56, insert the following new clause:—
  ("Notification of certain family and corporate interests.
  .—(1) For the purposes of sections (Obligation to notify known interests in voting shares in a public company) to (Obligation to notify particulars of registered ownership of voting shares in a public company) of this Act a person shall be taken to be interested in any shares in which his spouse or any infant child or step-child of his is interested.
  (2) For the purposes of those sections, a person shall be taken to be interested in shares if a body corporate is interested in them and—

  (a) that body corporate or its directors are accustomed to act in accordance with his directions or instructions; or

  (b) he is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of that body corporate.

  (3) Where a person is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of a body corporate and that body corporate is entitled to exercise or control the exercise of any of the voting power at general meetings of another body corporate (the "relevant voting power"), then, for the purposes of subsection (2)(b) above, the relevant voting power shall be taken to be exercisable by that person.
  (4) For the purposes of subsections (2)(b) and (3) above, a person shall be taken to be entitled to exercise or control the exercise of any voting power if he has a right (whether subject to conditions or not) the exercise of which would make him so entitled or is under an obligation (whether so subject or not) the fulfi.ment of which would make him so entitled.
  (5) In this section "infant", in relation to Scotland, means pupil or minor."
  Lord Trefgarne: My Lords, this clause provides that specified family and corporate interests must be taken into account under the main notification requirement. I do not think that I need to go further. I beg

  1011
  to move that this House doth agree with the Commons in their Amendment No. 120.
  Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  121 After Clause 56, insert the following new clause:
  "Notification of group interests of persons acting together.
  .—'(1) Subject to the following provisions of this section, an agreement between two or more persons which includes provision for the acquisition by any one or more of the parties to the agreement of interests in shares in a particular company ("the target company") is an agreement to which this section applies if—

  (a) it also includes provisions imposing obligations or restrictions on any one or more of the parties to the agreement with respect to their use, retention or disposal of interests in that company's shares acquired in pursuance of the agreement (whether or not together with any other interests of theirs in that company's shares to which the agreement relates); and

  (b) any interest in that company's shares is in fact acquired by any of the parties in pursuance of the agreement;

  and in relation to any such agreement references below in this section and in section (Obligation of persons acting together to keep each other informed of relevant facts) of this Act to the target company shall be read as referring to the company which is the target company for that agreement in accordance with this subsection.
  (2) The reference in subsection (1)(a) above to the use by parties to the agreement of interests in shares in the target company is a reference to the exercise of any rights or of any control or influence arising from those interests (including the right to enter into any agreement for the exercise, or for control of the exercise, of any of those rights by any other person).
  (3) Once any interest in shares in the target company has been acquired in pursuance of any such agreement as is mentioned in subsection (1) above, this section shall continue to apply to the agreement irrespective of—

  (a) whether or not any further acquistiions of interests in that company's shares take place in pursuance of the agreement; and

  (b) any change in the persons who are for the time being parties to the agreement; and

  (c) any variation of the agreement;

  so long as the agreement continues to include provisions of any description mentioned in paragraph (a) of that subsection.
  References in this subsection to the agreement include references to any agreement having effect (whether directly or indirectly) in substitution for the original agreement.
  (4) In this section (and in references elsewhere in this Part of this Act to an agreement to which this section applies) "agreement" includes any agreement or arrangement; and references in this section to provisions of an agreement—

  (a) accordingly include undertakings, expectations or understandings operative under any arrangement; and

  (b) (without prejudice to paragraph (a) above) also include any provisions, whether express or implied and whether absolute or not.

  (5) This section shall not apply to an agreement which is not legally binding unless it involves mutuality in the undertakings, expectations or understandings of the parties to it.
  (6) For the purposes of sections (Obligation to notify known interests in voting shares in a public company) to (Obligation to notify particulars of registered ownership of voting shares in a public company) of this Act each party to an agreement to which this section applies shall be taken to be interested in all shares in the target company in
  1012
  which any other party to the agreement is interested apart from the agreement (whether or not the interest of the other party in question was acquired, or includes any interest which was acquired, in pursuance of the agreement).
  (7) For the purposes of subsection (6) above and section (Obligation of persons acting together to keep each other informed of relevant facts) of this Act an interest of any party to an agreement to which this section applies in shares in the target company is an interest apart from that agreement if he is interested in those shares otherwise than by virtue of the application of this section in relation to that agreement (and accordingly any such interest of his apart from that agreement includes for those purposes any interest treated as his by virtue of section (Notification of certain family and corporate interests) of this Act or by virtue of the application of this section in relation to any other agreement with respect to shares in the target company to which he is a party).
  (8) Any notification with respect to his interest in shares in the target company made to that company under section (Obligation to notify known interests in voting shares of a public company) of this Act by a person who is for the time being a party to an agreement to which this section applies—

  (a) shall state that the person making the notification is a party to an agreement to which this section applies;

  (b) shall include the names and (so far as known to him) the addresses of the other parties to the agreement, identifying them as such; and

  (c) shall state whether or not any of the shares to which the notification relates are shares in which he is interested by virtue of this section and, if so, the number of those shares.

  (9) Where a person makes a notification to any company under section (Obligation to notify known interests in voting shares in a public company) of this Act in consequence or ceasing to be interested in any shares in that company by virtue of the fact that he or any other person has ceased to be a party to an agreement to which this section applies, the notification shall include a statement that he or that other person has ceased to be a party to the agreement (as the case may require) and also (in the latter case) the name and (if known to him) the address of that other person.
  (10) This section shall not apply to any agreement to underwrite or sub-underwrite any offer of shares in a company, provided the agreement is confined to that purpose and any matters incidental to it.
  Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 121. This amendment defines certain agreements to acquire interests in shares, the so-called "concert parties", and provides that parties to them are to be regarded as having all the interests in shares held by the other parties as well as their own. It also makes special provision as to the notification to companies of interests attributed by operation of the clause. I beg to move.
  Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
  On Question, Motion agreed to.

COMMONS AMENDMENT
122 After Clause 56, insert the following new clause:
("Obligation of persons acting together to keep each other informed of relevant facts.
.—(1) A person who is a party to an agreement to which section (Notification of group interests of persons acting together) of this Act applies shall be subject to the requirements of this section at any time when—

(a) the target company is a public company; and

(b) the shares in that company to which the agreement

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relates consist of or include shares comprised in relevant share capital of that company; and

(c) he knows the facts which make the agreement one to which section (Notification of group interests of persons acting together) applies and the facts with respect to the company and the shares mentioned in paragraphs (a) and (b) above respectively

(2) Any such person shall be under an obligation to notify each other party to the agreement, in writing, of the relevant particulars of his interest (if any) apart from the agreement in shares comprised in relevant share capital of the target company—

(a) on his first becoming subject to the requirements of this section; and

(b) on each occurrence after that time while he is still subject to those requirements of any event or circumstances within subsection (1) of section (Obligation to notify known interests in voting shares in a public company) of this Act as it applies to his case otherwise than by reference to interests treated as his under section (Notification of group interests of persons acting together) of this Act as it applies to that agreement

(3) For the purposes of subsection (2) above, the relevant particulars of a person's interest apart from the agreement in question in shares comprised in relevant share capital of the target company are, in relation to any notice required under that subsection—

(a) the number of shares (if any) comprised in that share capital in which he would be required to state his interest if he were required to make a notification under section (Obligation to notify known interests in voting shares in a public company) of this Act with respect to his interest in those shares apart from the agreement immediately after the time when his obligation to give that notice under subsection (2) above arose; and

(b) the relevant particulars with respect to the registered ownership of those shares, so far as known to him at the date of the notice

(4) A person who is for the time being subject to the requirements of this section shall also be under an obligation to notify each other party to the agreement, in writing—

(a) of any relevant particulars with respect to the registered ownership of any shares comprised in relevant share capital of the target company in which he is interested apart from the agreement; and

(b) of any change in those particulars;

of which in either case he becomes aware at any time after any interest notification date and before the first occasion following that date on which he becomes subject to any further obligation to give any notice under subsection (2) above with respect to his interest in shares comprised in that share capital.
(5) The reference in subsection (4) above to an interest notification date, in relation to any person's interest in shares comprised in relevant share capital of the target company, is a reference to either of the following, that is to say—

(a) the date of any notice given by him with respect to his interest under subsection (2) above; and.

(b) where he has failed to give any such notice, the date on which the period allowed by this section for giving that notice came to an end.

(6) A person who is a party to an agreement to which section (Notification of group interests of persons acting together) of this Act applies shall be under an obligation to notify each other party to the agreement, in writing, of his current address—

(a) on his first becoming subject to the requirements of this section; and

(b) on any change in his address occurring after that time and while he is still subject to those requirements.

(7) References in this section to the relevant particulars with respect to the registered ownership of any shares are references to such particulars in relation to those shares as are mentioned in section (Obligation to notify
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particulars of registered ownership of voting shares in a public company) (1)(a) or (b) of this Act.
(8) A person's obligation to give any notice required by this section to any other person must be performed within the period of five days next following the day on which that obligation arises.").
Lord Trefgarne: My Lords, this amendment imposes a criminal obligation on persons acting together as defined in the previous new clause to keep one another informed of all the relevant facts. Because the notification obligation depends upon each of the parties knowing of the interests of the others this is an essential supplementary provision. I beg to move that this House doth agree with the Commons in their Amendment No. 122.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
123 After Clause 56, insert the following new clause:
("Application of section (Obligation to notify known interests in voting shares of a public company) in cases within section (Notification of certain family and corporate interests) or (Notification of group interests of persons acting together).
.—(1) References in section (Obligation to notify known interests in voting shares in a public company) of this Act to a person's acquiring any interest in shares or ceasing to be interested in any shares shall be read as including references to his becoming or ceasing to be interested in those shares by virtue of another person's interest.
(2) For the purposes of this section, a person becomes or ceases to be interested in any shares by virtue of another person's interest where he becomes or ceases to be interested in any shares by virtue of section (Notification of certain family and corporate interests) or (as the case may be) by virtue of section (Notification of group interests of persons acting together) of this Act, whether—

(a) by virtue of the fact that the person who is interested in those shares becomes or ceases to be a person whose interests (if any) fall by virtue of either of those sections to be treated as his; or

(b) in consequence of the fact that any such person has become or ceased to be interested in those shares; or

(c) in consequence of the fact that he himself becomes or ceases to be a party to an agreement to which section (Notification of group interests of persons acting together) applies to which the person interested in those shares is for the time being a party or an agreement to which both he and that person are parties becomes or ceases to be one to which that section applies.

(3) Where a person becomes or ceases to be interested in any shares by virtue of another person's interest he shall be regarded for the purposes of section (Obligation to notify known interests in voting shares in a public company) of this Act as knowing he has acquired an interest in those shares or (as the case may be) that he has ceased to be interested in those shares if and when he knows both—

(a) the relevant facts with respect to that other person's interest in those shares; and

(b) the relevant facts by virtue of which he himself has become or ceased to be interested in those shares in accordance with section (Notification of certain family and corporate interests) or (Notification of group interests of persons acting together) of this Act.

(4) For the purposes of subsection (3)(a) above a person shall be regarded as knowing the relevant facts with respect to another person's interest in any shares if he knows (whether contemporaneously or otherwise

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either of the subsistence of that other person's interest in those shares at any relevant time or of the fact that that other person has become or ceased to be interested in those shares at any such time; and in this subsection "relevant time" means any time when that other person's interests (if any) fall or fell to be treated as his by virtue of section (Notification of certain family and corporate interests) or (Notification of group interests of persons acting together) of this Act.
(5) For the purposes of subsection (4) above (but without prejudice to its application apart from this subsection), a person shall be regarded as knowing of the subsistence of another person's interest in any shares or (as the case may be) that another person has become or ceased to be interested in any shares if he has been notified under section (Obligation of persons acing together to keep each other informed of relevant facts) of this Act of facts with respect to that other person's interest which indicate that he is or has become or ceased to be interested in those shares (whether on his own account or by virtue of a third person's interest in those shares).").
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 123. This clause makes provision for the application of the general notification obligation for a person's actual interests to cases where interests are attributed to him under the new clauses covering family and corporate interests and group interests of persons acting together.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
124 After Clause 56, insert the following new clause:
("Interests to be notified.
.—(1) The provisions of this section shall apply, subject to section (Interests to be disregarded) of this Act, in determining for the purposes of sections (Obligation to notify known interests in voting shares in a public company) to (Obligation to notify particulars of registered ownership of voting shares in a public company) of this Act, whether a person has a notifiable interest in any shares.
(2) Any reference to an interest in shares shall be read as including a reference to any interest of any kind whatsoever in the shares; and accordingly there shall be disregraded any restraints or restrictions to which the exercise of any right attached to the interest is or may be subject.
(3) Where any property is held on trust and any interest in shares is comprised in that property, any beneficiary of that trust who apart from this subsection does not have an interest in the shares shall be taken to have such an interest.
(4) A person shall be taken to have an interest in shares if—

(a) he enters into a contract for their purchase by him (whether for cash or other consideration); or

(b) not being the registered holder, he is entitled to exercise any right conferred by the holding of those shares or is entitled to control the exercise of any such right.

(5) A person shall be taken to have an interest in shares if, otherwise than by virtue of having an interest under a trust—

(a) he has a right to call for delivery of the shares to himself or to his order; or

(b) he has a right to acquire an interest in shares or is under an obligation to take an interest in shares;

whether in any case the right or obligation is conditional or absolute.
(6) For the purposes of subsection (4)(b) above, a person shall be taken to be entitled to exercise or control the exercise of any right conferred by the holding of shares if he has a right (whether subject to conditions or not) the exercise of which would make him so entitled or is under an obligation (whether so subject or not) the fulfilment of which would make him so entitled.
(7) Persons having a joint interest shall be taken each of them to have that interest.
(8) It is immaterial that shares in which a person has an interest are unidentifiable."").
Lord Trefgarne: My Lords, may I with the leave of your Lordships speak to Amendments Nos. 124 and 125 together? Amendment No. 124 provides a new clause to replace those parts of Section 28 of the 1967 Act which define when a person is interested in shares for the purposes of the obligation to disclose a substantial interest in shares.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
As an amendment to Amendment 124:
124A Subsection (1), line 4, leave out ("(obligation to notify particulars of registered ownership of voting shares in a public company)") and insert ("(notification of group interests of persons acting together)").
Lord Ponsonby of Shulbrede: My Lords, I beg to move Amendment No. 124A as an amendment to Commons Amendment No. 124.
Moved, That the amendment to the amendment be agreed to.—(Lord Ponsonby of Shulbrede.)
On Question, amendment to the amendment negatived.
9.35 p.m.
As an amendment to Amendment No. 124:
124B Subsection (4)(b) at end insert ("whether such entitlement arises by reason of a legally binding right or obligation or not")
Lord Ponsonby of Shulbrede: My Lords, I beg to move.
On Question, amendment to the amendment negatived.
On Question, Motion agreed to.

COMMONS AMENDMENT
125 After Clause 56, insert the following new clause:
("Interests to be disregarded.
.—(1) The following interests in shares shall for the purposes of sections (Obligation to notify known interests in voting shares in a public company) to (Obligation to notify particulars of registered ownership of voting shares in a public company) of this Act be disregarded, that is to say—

(a) where any property is held on trust according to the law of England and Wales and any interest in shares is comprised in that property, an interest in reversion or remainder or of a bare trustee or a custodian trustee and any discretionary interest;

(b) where any property is held on trust according to the law of Scotland and any interest in shares is comprised in that property, an interest in fee or of a simple trustee and any discretionary interest;

(c) an interest which subsists by virtue of an authorised unit trust scheme within the meaning of Prevention of Fraud (Investments) Act 1958, a scheme made under section 22 of the Charities Act 1960, section 11 of the Trustee Investments Act 1961 or section 1 of the Administration of Justice Act 1965 or the scheme set out in the Schedule to the Church Funds Investment Measure 1958;

(d) an interest of the Church of Scotland General Trustees or of the Church of Scotland Trust in shares held by them or of any other person in shares held by the said Trustees or Trust otherwise than as simple trustees;

(e) an interest, for the life of himself or another, of a person under a settlement in the case of which the property comprised in the settlement consists of, or includes, shares, and the conditions mentioned in subsection (3) below are satisfied;

(f) an exempt interest held by a recognised jobber;

(g) an exempt security interest;

(h) an interest of the President of the Family Division of the High Court subsisting by virtue of section 9 of the Administration of Estates Act 1925;

(i) an interest of the Accountant General of the Supreme Court in shares held by him;

(j) any such interests, or interests of such class, as may be prescribed for the purposes of this paragraph by regulations made by the Secretary of State by statutory instrument.

(2) A person shall not by virtue of section (Interests to be notified) (4)(b) of this Act be taken to be interested in any shares by reason only that he has been appointed a proxy to vote at a specified meeting of a company or of any class of its members and at any adjournment of that meeting or has been appointed by a corporation to act as its representative at any meeting of a company or of any class of its members.
(3) The conditions referred to in subsection (1)(e) above are, in relation to any settlement—

(a) that it is irrevocable; and

(b) that the settlor (within the meaning of section 444 of the Income and Corporation Taxes Act 1970) has no interest in any income arising under, or property comprised in, the settlement.

(4) A person is a recognised jobber for the purposes of subsection (1)(f) above if he is a member of The Stock Exchange recognised by the Council of The Stock Exchange as carrying on the business of a jobber; and an interest of any such person in shares is an exempt interest for those purposes if—

(a) he carries on that business in the United Kingdom; and

(b) he holds the interest for the purposes of that business.

(5) An interest in shares is an exempt security interest for the purposes of subsection (1)(g) above if—

(a) it is held by a person who is—

(i) a recognised bank or licensed institution within the meaning of the Banking Act 1979 or an insurance company within the meaning of the Insurance Companies Act 1974 to which Part II of that Act applies; or

(ii) a trustee savings bank (within the meaning of the Trustee Savings Banks Act 1976); or

(iii) a member of The Stock Exchange carrying on business in the United Kingdom as a stock broker; and

(b) it is held by way of security only for the purposes of a transaction entered into in the ordinary course of his business as such a person;

or if it is held by way of security only either by the Bank of England or by the Post Office for the purposes of a transaction entered into in the ordinary course of that part of the business of the Post Office which consists of the provision of banking services.
Lord Trefgarne: My Lords, I beg to move Amendment No. 125, which is consequential. I beg to move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
126 After Clause 56, insert the following new clause:
("Supplementary provisions.
.—(1) Where a person authorises any other person ("the agent") to acquire or dispose of, on his behalf, interests in shares comprised in relevant share capital of a public company, he shall secure that the agent notifies him immediately of acquisitions or disposals of interests in shares so comprised effected by the agent which will or may give rise to any obligation on his part to make a notification under section (Obligation to notify known interests in voting shares in a public company) of this Act with respect to his interest in that share capital.
(2) An obligation to make any notification imposed on any person by any provision of sections (Obligation to notify known interests in voting shares in a public company) to (Obligation to notify particulars of registered ownership of voting shares in a public company) of this Act shall be treated as not being fulfilled unless the notice by means of which it purports to be fulfilled identifies him and gives his address, and in a case where he is a director of the company, is expressed to be given in fulfilment of that obligation.
(3) A person who—

(a) fails to fulfil, within the proper period, an obligation to make any notification required by any provision of section (Obligation to notify known interests in voting shares in a public company) of this Act; or

(b) in purported fulfilment of any such obligation makes to a company a statement which he knows to be false or recklessly makes to a company a statement which is false; or

(c) fails to fulfil, within the proper period, an obligation to give any other person any notice required by section (Obligation of persons acting together to keep each other informed of relevant facts) of this Act; or

(d) fails without reasonable excuse to comply with subsection (1) above;

shall be guilty of an offence under this section.
(4) A person who is guilty of an offence under this section shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine, or both; and

(b) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both.

(5) It shall be a defence for a person charged with an offence under subsection (3)(c) above to prove that it was not possible for him to give the notice to that other person required by section (Obligation of persons acting together to keep each other informed of relevant facts) within the proper period, and either—

(a) that it has not since become possible for him to give the notice so required; or

(b) that he gave that notice as soon after the end of that period as it became possible for him to do so.

(6) Where a person is convicted of an offence under this section, other than an offence relating to his ceasing to be interested in shares in any company, the Secretary of State may direct that the shares in relation to which the offence was committed shall, until further order, be subject to the restrictions imposed by section 174 of the 1948 Act.
(7) Subsection (6) above shall apply in relation to shares in any company notwithstanding any power contained in the memorandum or articles of the company enabling it to impose similar restrictions on the shares in question itself.
(8) Subsections (3) to (7) of section 174 of the 1948 Act shall apply in relation to any shares subject to the restrictions imposed by that section by virtue of an order under this section as those subsections apply where the restrictions are imposed by virtue of an order under that section.
(9) Proceedings in respect of an offence under this section shall not, in England and Wales, be instituted except by or with the consent of, the Secretary of State or the Director of Public Prosecutions.").
Lord Trefgarne: My Lords, Amendment No. 126 provides a new clause which contains provisions supplemental to the new Clauses 117 to 125. It obliges a person who uses an agent to acquire or dispose of interests in shares to ensure that the agent notifies him immediately of certain acquisitions or disposals and it provides that a notification made under Amendments Nos. 117 and 119 must contain certain particulars as to the person giving the notification.
I beg to move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
Register of interests in shares
127 After Clause 56, insert the following new clause:
("Register of interests in shares.
.—(1) Every public company shall keep a register for the purposes of sections (Obligation to notify known interests in voting shares in a public company) to (Obligation to notify particulars of registered ownership of voting shares in a public company) of this Act, and whenever the company receives information from a person in consequence of the fulfilment of an obligation imposed on him by any of those sections, it shall be under an obligation to inscribe in the register, against the name of that person, that information and the date of the inscription.
(2) Without prejudice to subsection (1) above, where a company receives a notification under section (Obligation to notify known interests in voting shares in a public company) of this Act which includes a statement that the person making the notification or any other person has ceased to be a party to an agreement to which section (Notification of group interests of persons acting together) of this Act applies, it shall be under an obligation to record that information against the name of that person in every place where his name appears in the register as a party to that agreement (including any entry relating to him made against another person's name).
(3) An obligation imposed by subsection (1) or (2) above must be fulfilled within the period of three days next following the day on which that obligation arises.
(4) The company shall not, by virtue of anything done for the purposes of this section, be affected with notice of, or put upon inquiry as to, the rights of any person in relation to any shares.
(5) The register must be so made up that the entries against the several names inscribed in the register appear in chronological order.
(6) Unless the register is in such form as to constitute in itself an index, the company shall keep an index of the names inscribed in the register which shall in respect of each name contain a sufficient indication to enable the information inscribed against it to be readily found; and the company shall, within ten days after the date on which a name is inscribed in the register, make any necessary alteration in the index.
(7) Where the company ceases to be a public company it shall continue to keep the register and any associated index until the end of the period of six years beginning with the day next following that on which it ceases to be such a company.
(8) The register and any associated index—

(a) shall be kept at the place at which the register required to be kept by the company by section 29 of the 1967 Act (register of directors' interests) is kept; and

(b) subject to subsection (9) below, shall be available for inspection in accordance with section (Inspection of register and reports) of this Act.

(9) Neither the register nor any associated index shall be available for inspection in accordance with that section in so far as it contains information with respect to a company for the time being entitled to avail itself of the benefit conferred by section 3(3) or 4(3) of the 1967 Act (exemption of a company from requirement to disclose in its accounts particulars of shareholdings in subsidiaries or other bodies corporate incorporated or carrying on business outside the United Kingdom in circumstances where disclosure would be harmful to business).
(10) If default is made in complying with subsection (1) or (2) or with any of subsections (5) to (7) above, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum or, on conviction after continued contravention, a default fine not exceeding one-fiftieth of the statutory maximum").
Lord Trefgarne: My Lords, with the leave of your Lordships I will speak also to Amendment No. 132.

1021
This amendment (No. 127) provides a new clause which provides for the registration of substantial interests notified to a company. It follows the provisions of Section 34 of the Companies Act 1967 which currently regulates the registration of details of substantial interests but makes allowance for the new provision of the group interests of persons acting together. In such a case the person who is party to an agreement must be shown on the register as such. I beg to move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
Investigation by a company of interests in shares
128 After Clause 56, insert the following new clause:
("Power of company to require information with respect to interests in its voting shares.
.—(1) Any public company may by notice in writing require any person whom the company knows or has reasonable cause to believe to be or, at any time during the three years immediately preceding the date on which the notice is issued, to have been interested in shares comprised in relevant share capital of that company to confirm that fact or (as the case may be) to indicate whether or not it is the case and, where he holds or has during that time held any interest in shares so comprised, to give such further information as may be required in accordance with subsection (2) below.
(2) A notice under subsection (1) above may require the person to whom it is addressed—

(a) to give particulars of his own past or present interest in shares comprised in relevant share capital of the company (held by him at any time during the three year period mentioned in subsection (1) above);

(b) where the interest is a present interest and any other interest in the shares subsists or, in any case, where another interest in the shares subsisted during that three year period at any time when his own interest subsisted, to give so far as lies within his knowledge such particulars with respect to that other interest as may be required by the notice;

(c) where his interest is a past interest, to give so far as lies within his knowledge particulars of the identity of the person who held that interest immediately upon his ceasing to hold it.

(3) The particulars referred to in subsection (2)(a) and (b) above include particulars of the identity of persons interested in the shares in question and of whether persons interested in the same shares are or were parties to any agreement to which section (Notification of group interests of persons acting together) of this Act applies or to any agreement or arrangement relating to the exercise of any of the rights conferred by the holding of the shares.
(4) A notice under this section shall require any information given in response to the notice to be given in writing within such reasonable time as may be specified in the notice.
(5) Sections (Notification of certain family and corporate interests), (Notification of group interests of persons acting together) and (Interests to be notified) of this Act shall apply for the purpose of construing references in this section to persons interested in shares and to interests in shares respectively as they apply in relation to section (Obligation to notify known interests in voting shares in a public company) of this Act (but with the omission of any reference to section (Interests to be disregarded).
(6) This section shall apply in relation to a person who has or previously had or is or was entitled to acquire a right to subscribe for shares in a public company which would on issue be comprised in relevant share capital of that company as it applies in relation to a
1022
person who is or was interested in shares so comprised; and references in the preceding provisions of this section to an interest in shares so comprised and to shares so comprised shall be read accordingly in any such case as including references respectively to any such right and to shares which would on issue be so comprised.").
Lord Trefgarne: My Lords, Amendment No. 128 is consequential on an earlier amendment. I beg to move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
129 After Clause 56, insert the following new clause:
("Registration of interests disclosed under section (Power of company to require information with respect to interests in its voting shares).
.—(1) Whenever in pursuance of a requirement imposed on any person under section (Power of company to require information with respect to interests in its voting shares) of this Act a company receives any information to which this section applies relating to shares comprised in relevant share capital of the company it shall be under an obligation to inscribe against the name of the registered holder of those shares in a separate part of its register of interests in shares—

(a) the fact that the requirement was imposed and the date on which it was imposed; and

(b) any information to which this section applies received in pursuance of the requirement.

(2) This section applies to any information received in pursuance of a requirement imposed under section (Power of company to require information with respect to interests in its voting shares) which relates to the present interests held by any persons in shares comprised in relevant share capital of the company in question.
(3) Subsections (3) to (10) of section (Register of interests in shares) of this Act shall apply in relation to the part of the register maintained in accordance with subsection (1) above as they apply in relation to the remainder of the register, reading references to subsection (1) of that section as including references to subsection (1) above.").
Lord Trefgarne: My Lords, as with the previous amendment, this also is consequential. I beg to move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
130 After Clause 56, insert the following new clause:
("Investigation and report on requisition of members.
.—(1) A company may be required to exercise its powers under section (Power of company to require information with respect to interests in its voting shares) of this Act on the requisition of members of the company holding at the date of the deposit of the requisition not less than one-tenth of such of the paid up capital of the company as carries at that date the right of voting at general meetings of the company.
(2) The requisition must—

(a) state that the requisitionists are requiring the company to exercise its powers under section (Power of company to require information with respect to interests in its voting shares) of this Act;

(b) specify the manner in which they require those powers to be exercised; and

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(c) give reasonable grounds for requiring the company to exercise those powers in the manner specified;

and must be signed by the requisitionists and deposited at the registered office of the company.
(3) The requisition may consist of several documents in like form each signed by one or more requisitionists.
(4) On the deposit of a requisition which complies with this section it shall be the duty of the company to exercise its powers under section (Power of company to require information with respect to interests in its voting shares) of this Act in the manner specified in the requisition.
(5) On the conclusion of any investigation carried out by a company in pursuance of a requisition under this section it shall be the duty of the company to cause a report of the information received in pursuance of that investigation to be prepared, and that report shall be made available at the registered office of the company within a reasonable period after the conclusion of that investigation.
(6) Where—

(a) a company undertakes an investigation in pursuance of a requisition under this section; and

(b) that investigation is not concluded before the end of the period of three months beginning with the date immediately following the date of the deposit of the requisition;

it shall be the duty of the company to cause to be prepared, in respect of that period and each successive period of three months ending before the conclusion of the investigation, an interim report of the information received during that period in pursuance of the investigation, and each such interim report shall be made available at the registered office of the company within a reasonable period after the end of the period of three months to which it relates.
(7) The period for making any report prepared under this section available as required by subsection (5) or (6) above shall not exceed fifteen days.
(8) A report prepared under this section shall not include any information with respect to a company entitled to avail itself of the benefit conferred by section 3(3) or 4(3) of the 1967 Act (where disclosure of substantial holdings in bodies incorporated or carrying on business outside the United Kingdom would be harmful) but where any such information is omitted that fact shall be stated in the report.
(9) The company shall within three days of making any report prepared under this section available at its registered office notify the requisitionists that the report is so available.
(10) An investigation carried out by a company in pursuance of a requisition under this section shall be regarded for the purposes of this section as concluded when the company has made all such enquiries as are necessary or expedient for the purposes of the requisition and, in the case of each such enquiry, either a response has been received by the company or the time allowed for a response has elapsed.
(11) Any report prepared under this section—

(a) shall be kept at the company's registered office from the day on which it is first made available there in accordance with subsection (5) or (6) above until the expiration of the period of six years beginning with the day next following that day; and

(b) shall be available for inspection in accordance with section (Inspection of register and reports) of this Act so long as it is so kept.

(12) If default is made in complying with subsection (4), (5). (6), (9) or (11)(a) above the company and every officer of the company who is in default shall be liable—

(a) on conviction on indictment, to a fine; and

(b) on summary conviction, to a fine not exceeding the statutory maximum").

Lord Trefgarne: My Lords, this is a consequential amendment. I beg to move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
131 After Clause 56, insert the following new clause:
("Penalties for failure to provide information under section (Power of company to require information with respect to interests in its voting shares).
.—(1) Where a notice is served by any company under subsections (1) and (2) of section (Power of company to require information with respect to interests in its voting shares) of this Act on any person who is or was interested in any shares in the company and that person fails to give the company any information required by the notice within the time specified in the notice, the company may apply to the court for an order directing that the shares in question shall be subject to the restrictions imposed by section 174 of the 1948 Act.
(2) An order may be made by the court on an application under subsection (1) above notwithstanding any power contained in the memorandum or articles of the applicant company enabling it to impose similar restrictions on the shares in question itself.
(3) Where an order is made under subsection (1) above directing that shares shall be subject to the restrictions imposed by section 174 of the 1948 Act, the company or any person aggrieved by the order may apply to the court for an order directing that the shares shall cease to be subject thereto.
(4) Subsections (3A) to (7) of section 174 shall apply in relation to any shares subject to the restrictions imposed by section 174 by virtue of an order under this section but with the omission in subsections (3A) to (6) of any reference to the Secretary of State or the Board of Trade.
(5) Subject to subsections (6) and (7) below, any person who fails to comply with a notice under section (Power of company to require information with respect to interests in its voting shares) of this Act, or who, in purported compliance with such a notice, makes any statement which he knows to be false in a material particular or recklessly makes any statement which is false in a material particular shall be guilty of an offence and liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine or both; and

(b) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum or both.

(6) A person shall not be guilty of an offence by virtue of failing to comply with a notice under section (Power of company to require information with respect to interests in its voting shares) of this Act if he proves that the requirement to give the information was frivolous or vexatious.
(7) A person shall not be obliged to comply with a notice under section (Power of company to require information with respect to interests in its voting shares) of this Act if he is for the time being exempted by the Secretary of State from the operation of that section; but the Secretary of State shall not grant any such exemption except after consultation with the Governor of the Bank of England and unless satisfied that, having regard to any undertaking given by the person in question with respect to the shares held or to be held by him, there are special reasons why that person should not be subject to the obligations imposed by that section").
Lord Trefgarne: My Lords, Amendment No. 131 is consequential on Amendment No. 128. I beg to

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move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to,

COMMONS AMENDMENTS
Removal of entries from register
132 After Clause 56, insert the following new clause:
("Provision for removal of certain entries in register
.—(1) A company may remove an entry against any person's name from its register of interests in shares where more than six years have elapsed since the date of its inscription, and either—

(a) that entry recorded the fact that the person in question had ceased to have an interest subject to the notification requirement under section (Obligation to notify known interests in voting shares in a public company) of this Act in relevant share capital of the company; or

(b) it has been superseded by a later entry inscribed under section (Register if interests in shares) of this Act against the same person's name;

and in a case within paragraph (a) above the company may also remove that person's name from the register.
(2) Where any person in pursuance of an obligation imposed on him by any provision of this Part of this Act gives to a company the name and address of any other person as being interested in shares in the company, the company shall within fifteen days of the date on which it was given that information, notify that other person that he has been so named and shall include in that notification—

(a) particulars of any entry relating to him made, in consequence of its being given that information, by the company in its register of interests in shares; and

(b) a statement informing him of his right to apply to have that entry removed in accordance with the following provisions of this section.

(3) Any person who has been notified by a company in pursuance of subsection (2) above that an entry relating to him has been made in the company's register of interests in shares may apply to the company for the removal of that entry from the register; and the company shall remove the entry if satisfied that the information in pursuance of which the entry was made was incorrect.
(4) Where a person who is identified in a company's register of interests in shares as being a party to an agreement to which section (Notification of group interests of persons acting together) of this Act applies (whether by an entry against his own name or by an entry relating to him made against another person's name as mentioned in subsection (2)(a) above) ceases to be a party to that agreement, he may apply in writing to the company for the inclusion of that information in the register; and if the company is satisfied that he has ceased to be a party to that agreement it shall record that information (if not already recorded) in every place where his name appears as a party to that agreement in the register.
(5) Where an application under subsection (3) or (4) above is refused (in a case within subsection (4), otherwise than on the ground that the information has already been recorded) the applicant may apply to the court for an order directing the company to remove the entry in question from the register or (as the case may be) to include the information in question in the register, and the court may if it thinks fit make such an order.
(6) Where any name is removed from a company's register of interests in shares in pursuance of subsection (1) or (3) above or an order under subsection (5), the company shall within fourteen days of the date of that removal make any necessary alteration in any associated index.
(7) If default is made in complying with subsection (2) or (6) above. the company and every officer who is in default shall be liable on summary conviction to a fine
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not exceeding one-fifth of the statutory maximum or, on conviction after continued contravention, a default fine not exceeding one-fiftieth of the statutory maximum.
132A Insert the following clause:
("Prohibition of removal of entries in register
.—(1) Entries in a company's register of interests in shares shall not be deleted except in accordance with section (Provision for removal of certain entries in register) of this Act.
(2) If an entry is deleted from a company's register of interests in shares in contravention of subsection (1) above the company shall restore that entry to the register as soon as is reasonably practicable.
(3) If default is made in complying with subsection (1) or (2) above the company and every officer who is in default shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum or, on conviction after continued contravention of subsection (2), a default fine not exceeding one-fiftieth of the statutory maximum.").
Lord Trefgarne: My Lords, with the leave of your Lordships I will move Amendments Nos. 132 and 132A en bloc. I beg to move that this House doth agree with the Commons in their amendments.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
Inspection of register and reports
133 After Clause 56, insert the following new clause:
("Inspection of register and reports
.—(1) Any register of interests in shares and any report which is required by section (Investigation and report on requisition of members) of this Act to be available for inspection in accordance with this section shall, during business hours (subject to such reasonable restrictions as the company may in general meeting impose, provided that not less than two hours in each day are allowed for inspection) be open to the inspection of any member of the company or of any other person without charge.
(2) Any such member or other person may require a copy of any such register or report, or any part of it, on payment of ten pence or such less sum as the company may prescribe, for every hundred words or fractional part thereof required to be copied; and the company shall cause any copy so required by a person to be sent to him before the expiration of the period of ten days beginning with the day next following that on which the requirement is received by the company.
(3) If an inspection required under this section is refused or a copy required under this section is not sent within the proper period, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum, or on conviction after continued contravention, a default fine not exceeding one-fiftieth of the statutory maximum.
(4) In the case of a refusal of an inspection required under this section of any register or report, the court may by order compel an immediate inspection of it; and in the case of a failure to send a copy required under this section, the court may by order direct that the copy required shall be sent to the person requiring it.
(5) The Secretary of State may by regulations made by statutory instrument substitute a sum specified in the regulations for the sum for the time being mentioned in subsection (2) above.").
Lord Trefgarne: My Lords, this amendment provides for the inspection of a company's register of substantial interests and of any report or interim

1027
report produced in an investigation by a company of interests in its shares. Inspection by any person may be made without charge but a maximum fee is provided for provision of a copy. The Secretary of State is empowered to change this maximum by statutory instrument. I beg to move that this House doth agree with the Commons in their amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
Supplemental
134 After Clause 56, insert the following new clause:
("Offences by bodies corporate.
.—(1) Where a body corporate is guilty of an offence under section (Supplementary provisions) or (Penalties for failure to provide information under section (Power of company to require information with respect to interests in its voting shares)) (5) of this Act and it is proved that the offence occurred with the consent or connivance of, or was attributable to any neglect on the part of any director, manager, secretary or other officer of the body, or any person who was purporting to act in any such capacity he, as well as the body corporate, shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
(2) Where the affairs of a body corporate are managed by its members, subsection (1) above shall apply in relation to the acts and defaults of a member in connection with his functions of management as if he were a director of the body corporate.").
135 Insert the following new clause:
"Interpretation.—
(1) In this Part of this Act—
"associated index", in relation to any register, means the index kept in relation to that register in pursuance of section (Register of interests in shares) (6) of this Act;
"register of interests in shares" means the register kept in pursuance of section (Register of interests in shares) of this Act including, except where the context otherwise requires, that part of the register kept in pursuance of section (Registration of interests disclosed under section (Power of company to require information with respect to interests in its voting shares)) of this Act; and
"relevant share capital" has the meaning given by section (Obligation to notify known interests in voting shares in a public company) (10) of this Act.
(2) It is hereby declared for the avoidance of doubt that where the relevant share capital of a public company is divided into different classes of shares, references in this Part of this Act to a percentage of the nominal value of its relevant share capital are references to a percentage of the nominal value of the issued shares comprised in each of those classes taken separately.
(3) Where the period allowed by any provision of this Part of this Act for fulfilling any obligation is expressed as a number of days, any day that is a Saturday or Sunday or a bank holiday in any part of Great Britain shall be disregarded in reckoning that period.").
136 Insert the following new clause:
("Repeals, transitional provisions and saving
.—(1) Sections 33 and 34 of the 1967 Act and sections 26 and 27 of the 1976 Act, which are superseded by the preceding provisions of this Part of this Act, shall cease to have effect.
(2) Subject to subsection (3) below, where on the appointed day a person has an interest subject to the
1028
notification requirement under section (Obligation to notify known interests in voting shares in a public company) of this Act in relevant share capital of a public company he shall be under an obligation to make to the company the notification with respect to his interest required by subsection (5) of that section.
(3) A person shall not be required to make any such notification by virtue of subsection (2) above in any case where—

(a) he has made a notification to the company under section 33 of the 1967 Act with respect to any interest of his in shares comprised in the share capital in question; and

(b) the percentage level of the interest notified (or last notified) by him under that section is the same as the percentage level of his interest on the appointed day determined in accordance with section (Obligation to notify known interests in voting shares in a public company) of this Act.

(4) In subsection (3)(b) above "percentage level" means in relation to any interest in share capital notified by a person under section 33 of the 1967 Act, the percentage figure found by expressing the aggregate nominal value of all the shares so notified as a percentage of the nominal value of that share capital as known to the person in question on the appointed day and rounding that figure down, if it is not a whole number, to the next whole number.
(5) Section (Obligation to notify known interests in voting shares in a public company) (6) shall not apply in any case where a person is required to make a notification under that section by virtue of subsection (2) above, but a person's obligation to make any such notification must he performed within the period of ten days next following the appointed day.
(6) Section (Notification of group interests of persons acting together) of this Act shall apply in relation to an agreement notwithstanding that it was made before the appointed day or that any such acquisition of shares as is mentioned in subsection (1)(b) of that section took place before the appointed day.
(7) Section (Application of section (Obligation to notify known interests in voting shares in a public company) in cases within section (Notification of certain family and corporate interests) or (Notification of group interests of persons acting together)) of this Act applies where a person becomes or ceases to be interested in any shares by virtue of section (Notification of certain family and corporate interests) or (Notification of group interests of persons acting together) of this Act on the coming into operation of either of the two last-mentioned sections as it applies in the other cases mentioned in subsection (2) of that section; and references in that section to a person's becoming interested in any shares by virtue of section (Notification of certain family and corporate interests) shall be read as including any case within this subsection notwithstanding that the person in question was interested in the shares immediately before the appointed day by virtue of section 28(3) of the 1967 Act.
(8) Any register kept by a company immediately before the appointed day under section 34 of the 1967 Act, and any part of any such register so kept for the purposes of section 27 of the 1976 Act, shall continue to be kept by the company under and for the purposes of sections (Register of interests in shares) and (Registration of interests disclosed under section (Power of company to require information with respect to interests in its voting shares)) of this Act respectively.
(9) Notwithstanding the repeal by this Act of section 27 of the 1976 Act, subsections (1) to (4) and (7) to (10) of that section shall continue to apply in relation to any notice given to any person under that section before the appointed day (and further notices may accordingly be given under that section on or after that day by virtue of information received in pursuance of any notice given before that day or any further notice given by virtue of this subsection); and references in section (Registration of interests disclosed under section (Power of company to require information with respect to intererests in its voting shares)) of this Act to a requirement imposed

1029
under section (Power of company to require information with respect to interests in its voting shares) of this Act shall be read as including references to a requirement imposed under section 27.").
9.40 p.m.
Lord Trefgarne: My Lords, with the leave of the House, I beg to move that this House doth agree with the Commons in their Amendments Nos. 134 to 136, and I would speak also to Amendments Nos. 233A and 242. These provides that where a body corporate commits an offence under the new clauses on disclosure of interest any officer of the company or person acting as an officer who consented or connived in the offence or whose negligence was attributed also commits an offence.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
137 After Clause 57, insert the following new clause:
("Distributions in kind
The following section shall be inserted after section 43 of the 1980 Act—
"Distributions in kind.
43A. Where a company makes a distribution of or including any non-cash asset and any part of the amount at which that asset is stated in the accounts relevant for the purposes of that distribution in accordance with section 43 of this Act represents an unrealised profit, that profit shall be treated as a realised profit—

(a) for the purpose of determining the lawfulness of that distribution in accordance with this Part of this Act (whether before or after it takes place); and

(b) for the purpose of the application of paragraphs 12(a) and 34(4)(b) of Schedule 8 to the 1948 Act (only realised profits to be included in or transferred to the profit and loss account) in relation to anything done with a view to or in connection with making that distribution.".").

Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 137. This clause was inserted at Report stage in another place. It provides that, where a company distributes an asset in kind which contains an element of unrealised profit, the amount of that unrealised profit should be treated as a realised profit on distribution. In other words—I think that this is common sense—the act of distribution is effectively an act of realisation.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
138 Clause 58, page 64, line 2, after ("164") insert ("(1)").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 138, and, with your Lordships' permission, I shall speak also to Amendment No. 203. These are drafting amendments to rectify the omission of the figure "(1)" after "section 164" in line 2 of Clause 58(1) and before (a) and (b) in the
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third line of paragraph 7 of Schedule 3. They make it clear that Clause 80(1) is amending Section 164 of the 1948 Act and that the reference in Section 172(3) of that Act to the appointment of inspectors is to the appointment of inspectors on the application of members under Section 164(1) (a) and (b) and not the company itself under (1)(c) introduced by Clause 58(1).
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
139 Clause 60, page 66, line 24, at end add—
("(2) In section 171 of the 1948 Act (inspectors' report to be evidence) for the words from "authenticated" to "investigated" there shall be substituted the words "certified by the Secretary of State to be a true copy of such a report"; and at the end there shall be added the following paragraph—
"Any document purporting to be such a certificate as is referred to above shall be received in evidence and shall, unless the contrary is proved, be deemed to be such a certificate.".").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 139. This amendment provides that an inspector's report need no longer be authenticated by the seal of the company before it can be admitted in legal proceedings as evidence of the opinion of the inspectors, but instead must be certified by the Secretary of State.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
140 Clause 61, page 66, line 43, at end insert ("or, in the case of any other such report, a copy of the whole report").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 140. Clause 61 proposes three amendments to Section 172(5) of the 1948 Act, one of which permits the Secretary of State to cause the Registrar of Companies to keep a copy of the report of inspectors under Section 172 in certain circumstances instead of obliging him to do so as at present. We do not think that Clause 61(c) as brought from the Lords to the other place achieves this objective, and this amendment is intended to ensure that the discretion given to the Secretary of State as to whether to send a copy of the report of inspectors appointed to investigate the ownership of a company extends to the report of all such investigations whether edited or not.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
141 After Clause 61, insert the following new clause:
("Extension of power to require information to be provided under section 173 of the 1948 Act
"In section 173(1) of the 1948 Act (certain persons required to give information about intenvts in shares to

1031
the Secretary of State) for the words from "(a) to be" "expected to obtain" there shall be substituted the words "to have or to be able to obtain any information" and at the end of that subsection there shall be inserted the following words, "to give any such information to the Secretary of State".
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 141. This amendment proposes a new clause to widen the powers of the Secretary of State to investigate the ownership of shares or debentures under Section 173 of the 1948 Act. It will enable the department to make enquiries of any person whom it has reasonable cause to believe to have, or to be able to obtain, information about interests in shares or debentures and will require such a person to provide that information.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
142 Insert the following new clause:
("Amendment of section 174 of the 1948 Act
.—(1) Subject to subsection (8) below, section 174 of the 1948 Act (power to impose restrictions on shares or debentures) shall have effect subject to the following modifications.
(2) In subsection (1) (power of Secretary of State to impose restrictions) the words from "and that" to "Act" shall cease to have effect.
(3) The following subsections shall be inserted after subsection (2)—
"(2A) Where shares are subject to the restrictions imposed by subsection (2)(a) of this section any agreement to transfer the shares or in the case of unissued shares the right to be issued with the shares shall be void except an agreement to sell the shares on the making of an order made under subsection (3A)(b) of this section.
(2B) Where shares are subject to the restrictions imposed by subsection (2)(c) or (d) of this section any agreement to transfer any right to be issued with other shares in right of those shares or to receive any payment on those shares (otherwise than in a liquidation) shall be void except an agreement to transfer any such right on the sale of the shares on the making of an order made under subsection (3A)(b) of this section."
(4) In subsection (3) (power of court to lift restrictions) for the words from "and the court may" to the end there shall be substituted the words "for an order directing that the shares shall cease to be subject thereto."; and the following subsections shall be inserted after subsection (3)—
"(3A) Subject to subsections (3B) and (4A) of this section, an order of the court or of the Secretary of State directing that shares shall cease to be subject to the restrictions imposed by this section may be made only if—

(a) the court or, as the case may be, the Secretary of State is satisfied that the relevant facts about the shares have been disclosed to the company and no unfair advantage had accrued to any person as a result of the earlier failure to make that disclosure; or

(b) the shares are to be sold and the court or the Secretary of State approves the sale.

(3B) Where any shares in a company are subject to restrictions imposed by this section, the court may on the application of the Secretary of State or the company order the shares to be sold, subject to the approval of the court as to the sale, and may also direct that the
1032
shares shall cease to be subject to those restrictions.
(3C) Where an order has been made under subsection (3B) of this section then, on the application of the Secretary of State, the company, the person appointed by or in pursuance of the order to effect the sale or any person interested in the shares, the court may make such further order relating to the sale or to the transfer of the shares as it thinks fit.
(3D) Where any shares are sold in pursuance of an order made under subsection (3B) of this section, the proceeds of sale, less the costs of the sale, shall be paid into court for the benefit of the persons who are beneficially interested in the shares; and any such person may apply to the court for the whole or part of those proceeds to be paid to him.
(3E) On an application under subsection (3D) of this section the court shall, subject to subsection (3F) of this section, order the payment to the applicant of the whole of the proceeds of sale together with any interest thereon, or if any other person had a beneficial interest in the shares at the time of their sale, such proportion of those proceeds and interest as is equal to the proportion which the value of the applicant's interest in the shares bears to the total value of the shares.
(3F) On granting an application for an order under subsection (3B) or (3C) of this section the court may order that the costs of the applicant shall be paid out of the proceeds of sale; and, where an order under this subsection is made, the applicant shall be entitled to payment of his costs out of the proceeds of sale before any person interested in the shares in question receives any part of those proceeds.".
(5) In subsection (4) (continuation of subsection (2)(c) and (d) restrictions) after the words "those shares" there shall be inserted the words "or which is made under subsection (3B) of this section".
(6) The following subsection shall be inserted after subsection (4)—
"(4A) Subsection (3A) of this section shall not apply in relation to any order of the court or of the Secretary of State directing that shares shall cease to be subject to any restrictions which have been continued in force in relation to those shares by virtue of subsection (4) of this section.".
(7) In subsection (5) (criminal offences) the following paragraph shall be inserted after paragraph (c) "or
(d) being the holder of any such shares, or being entitled to any such right as is mentioned in subsection (2B) of this section, enters into any agreement which is void by virtue of subsection (2A) or (2B) of this section,".
(8) The preceding provisions of this section and the repeal of part of section 174(1) contained in Schedule 4 to this Act shall not have effect in relation to any shares which on the appointed day are subject to the restrictions imposed by section 174 and subsection (3) above shall not apply in relation to any agreement made before the appointed day.").
9.45 p.m.
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 142. With your Lordships' permission, I shall speak also to Amendments Nos. 230 and 240. Amendment No. 142 concerns the power of the Secretary of State to impose restrictions upon shares when difficulty is encountered in discovering information about the ownership of shares in an investigation undertaken on his initiative. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
143 Clause 62, page 67, line 14, at end insert—
("(1A) In section 334, the following subsection shall be inserted after subsection (3)—
"(3A) An answer given by a person to a question put to him in exercise of the powers conferred by subsection (3) of this section may be used in evidence against him.".").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 143. I should like to explain also Amendment No. 212. These amendments provide that an answer given by a person to a question put to him in the course of investigations under Sections 164 to 166, 172 and 334 of the Companies Act 1948, as amended by Clause 62 of the Bill, or Section 32 of the 1967 Act, may be used in evidence against him. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
144 Clause 63, page 67, line 38, after ("company") insert ("or with the receivership or management of the property of a company").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 144, and I should like to speak also to Amendments Nos. 145 to 159 en bloc as well as Amendments Nos. 205, 214 and 235. These amendments are principally to Clause 63. Clause 63 is designed to strengthen the existing powers in the Companies Acts 1948 and 1976 which enable a court to disqualify a person from taking part in the management of a company. These amendments make further small improvements to it. Perhaps I can deal with them fairly briefly.
Amendments Nos. 144 and 145 bring certain misconduct in the course of acting as receiver within the grounds for a disqualification order. Amendment No. 146 extends the grounds on which disqualification orders can be made to include not only breach of duty to the company, but any breach of duty as officer, liquidator, receiver or manager of the company. Amendment No. 147 is a drafting amendment. Amendments Nos. 148 and 149 widen the scope of the disqualification order to debar a person from acting as a receiver and from involvement in the promotion or formation of a company. Amendment No. 154 is consequential.
Amendments Nos. 150 and 151 prevent the courts from using retrospectively their new power to disqualify a person in respect of conduct as a liquidator or receiver. Amendment No. 152 will prevent the longer period of disqualification—up to 15 years—being applied in respect of certain acts committed before the appointed day. Amendment No. 153 specifies that a person may seek leave to form or promote a company from any court with jurisdiction to wind up companies. Amendments Nos. 155 and 157 restrict the definition of "default order" to defaults involving the submission of returns to the Registrar of Companies. Amendment No. 156 is very technical. Amendment No. 158
1034
will enable a disqualification order for persistent default to be applied for by the liquidator or a past or present member of any of the companies against which the offences or defaults have been, or are alleged to have been, committed.
Amendment No. 159 provides that orders and applications for orders made before the appointed day under Section 28 of the Companies Act 1976, which is to be repealed, shall be treated as orders and applications under Section 188 of the Companies Act 1948. Amendment No. 205 will bring the coverage of the disqualification from managing companies, which is provided by Section 187 of the 1948 Act to undischarged bankrupts, into line with the amended Section 188 by including promotion, formation and liquidation as activities from which such persons are debarred. Amendment No. 214 is consequential to Section 29 of the 1976 Act which requires the courts to notify the Secretary of State of the details of disqualification orders. Amendment No. 235 is consequential. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
As an amendment to Commons Amendment No. 144:
144A At end insert ("or any indictable offence which in the opinion of the court renders him unfit to manage or otherwise control the affairs of a company").
Lord Ponsonby of Shulbrede: My Lords, I beg to move Amendment No. 144A as an amendment to Amendment No. 144.
Moved, That Amendment No. 144A, as an amendment to Commons Amendment No. 144, be agreed to.—(Lord Ponsonby of Shulbrede.)
Lord Davies of Leek: My Lords, can we have a rational statement as to why the Government refuse what appears to me to be a reasonable insertion in a Companies Act? There are so many people who play about forming companies and who go bankrupt. We hear of cases week in and week out. Although we are going through this so quickly, as with the slaughter of the innocents, I would like a rational answer. I do not intend to delay the House.
Lord Mackay of Clashfern: My Lords, I hope that my answer can be rational and brief and, incidentally to that, I do not wish to slaughter any innocents. The situation is that the Companies Act provisions generally deal with offences which are committed in connection with the affairs of the company. This amendment proposes an enlargement of that to indictable offences which, in the opinion of the court, render them unfit to manage or otherwise control the affairs of a company, whether or not that offence is itself committed in connection with the affairs of a company. One can see that that is a reasonable proposal. We think that that is part of a larger exercise and we feel that it would be right to await the general review of the law on insolvency which is being undertaken by the committee under Sir Kenneth Cork. That is why we do not think it right at this stage to

1035
amend this Bill by adding still further to its manifold provisions.
Lord Ponsonby of Shulbrede: My Lords, I thank the noble and learned Lord for that explanation and beg leave to withdraw the amendment.
Amendment to the amendment, by leave, withdrawn.
On Question, Motion agreed to.

COMMONS AMENDMENTS
145 Clause 63, page 68, line 5, after ("company") insert ("or receiver or manager of the property of the company").
146 Clause 63, page 68, line 7, leave out ("to the company") and insert ("as such officer, liquidator, receiver or manager").
147 Clause 63, page 68, line 15, leave out ("for") and insert ("of").
148 Clause 63, page 68, line 23, after ("director") insert ("or a receiver or manager of the property of a company").
149 Clause 63, page 68, line 24, after ("the") insert ("promotion, formation or").
150 Clause 63, page 68, line 26, at end add—
("(1C) Subsection (1)(a) and (c)(ii) of this section shall not apply in relation to anything done before the date on which section 63 of the Companies Act 1981 came into force by a person in his capacity as liquidator of a company or as receiver or manager of the property of a company.").
151 Clause 63, page 68, line 27, at beginning insert ("Subject to subsection (1C) of this section").
152 Clause 63, page 68, line 41, at end insert—
("( ) Subject to subsection (1C) of this section, subsection (1)(c) of this section shall apply in relation to any offence committed or other thing done before the date on which section 63 of the Companies Act 1981 came into force but a disqualification order made on the grounds of such offence or other thing done shall not be made for any period in excess of five years.").
153 Clause 63, page 69, line 36, leave out ("and") and insert—
("( ) in relation to the granting of leave to promote or form a company, means any court with any jurisdiction to wind up companies; and").
154 Clause 63, page 69, line 39, after ("company") insert ("or to be a receiver or manager of the property of a company").
155 Clause 63, page 69, line 42, after ("made") insert ("against any person").
156 Clause 63, page 70, line 1, leave out ("lay") and insert ("deliver").
157 Clause 63, page 70, line 2, at end add ("by virtue of any contravention of or failure to comply with any relevant requirement (whether on his own part or on the part of any company);").
158 Clause 63,page 70, leave out lines 37 to 42 and insert—
("(2) The following subsection shall be substituted for subsection (4) of section 188—
"(4) An application to a court with jurisdiction to wind up companies for the making of a disqualification order against any person may be made by the Secretary of State or the official receiver or by the liquidator or any past or present member or creditor of any company in relation to which that person has committed or is alleged to have committed an offence or other default; and on the hearing of any such application made by the Secretary of State or the official receiver or the liquidator or of any application for leave made by a person against whom a disqualification order has been made on the application of the Secretary of State, official receiver or liquidator, the Secretary of State, official receiver or liquidator shall appear and call the attention of the court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses."").
159 Clause 63, page 71, line 12, leave out from ("made") to end of line 14 and insert ("under section 28 shall have dffect as if made under section 188 of the 1948 Act and any application made before the appointed day for such an order shall be treated as an application for an order under section 188.").
160 After Clause 63, insert the following new clause:
"Prohibition on directors of insolvent companies from acting as liquidators etc.
.—(1) In subsection (1) of section 9 of the Insolvency Act 1976 (power of court to disqualify persons from acting as directors, etc.) for the words from "the court may" to the end there shall be substituted the words—
"the court may make an order that that person shall not, without the leave of the court—

(a) be a director of or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company; or

(b) be a liquidator of a company; or

(c) be a receiver or manager of the property of a company;

for such period as may, subject to subsection (1A) below, be specified in the order.
(1A) The period which may be specified in any order under subsection (1) above shall begin with the date of the order and may not exceed five years if none of the conduct to which the court has regard under subsection (1)(b) occurred after the day appointed for the coming into force of section (Prohibition on directors of insolvent companies from acting as liquidators, etc.) of the Companies Act 1981, or fifteen years in any other case.".
(2) In subsection (7) of that section, for the definition of "company" there shall be substituted the following definition—
" 'company' includes any company which may be wound up under Part IX of the Companies Act 1948;".
(3) The following subsection shall be inserted in that section after subsection (7)—
"(7A) An order under subsection (1) may be made on grounds which are or include matters other than criminal convictions notwithstanding that the person in respect of whom the order is to be made may be criminally liable in respect of those matters."
161 After Clause 63, insert the following new clause:
Register of past directorships
.—(1) Section 200 of the 1948 Act (register of directors and secretaries) shall have effect subject to the following modifications.
(2) In subsection (2)—

(a) in paragraph (a) (particulars of directorships to be kept on the register) after the words "particulars of any other directorships held by him" there shall be inserted the words "or which have been held by him";

(b) in the proviso (particulars not required to be kept on register) for all the words preceding the words "and for the purposes of" there shall be substituted the words—

"Provided that it shall not be necessary for the register to contain on any day particulars of any directorship—

(a) which has not been held by a director at any time during the five years preceding that day;

(b) which is held by a director in any company which—

(i) is dormant or, in relation to the company keeping the register, is a relevant company; and

(ii) if he also held that directorhsip for any period during the five years immediately preceding that day, was for the whole of that period either dormant or such a relevant company;

1037

(c) which was held by a director for any period during the five years preceding that day in a company which for the whole of that period was either dormant or, in relation to the company keeping the register, a relevant company;";

and at the end of that subsection there shall be added the words"and

(iii) a company shall be treated as being or as having been dormant during any period during which no transaction occurs which is or was a significant accounting transaction (within the meaning of section 12(6) of the Companies Act 1981) for that company; and

(iv) a company shall be treated as being or as having been at any time a relevant company in relation to any other company if at that time it is or was a company of which that other company is or was a wholly owned subsidiary or if it is or was a wholly owned subsidiary of that other company or of another company of which that other company is or was a wholly owned subsidiary.".

(3) The following subsection shall be substituted for subsection (7)—
"(7) If any inspection required under this section is refused or if default is made in complying with subsection (1), (2), (3) or (4) of this section, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-tenth of the statutory maximum.".
This subsection shall not have effect in relation to any offence committed before the appointed day.
(4) Subsection (4) of section 200 (notification to registrar of changes in register) shall not apply in relation to any change in the particulars contained in a company's register of directors and secretaries made solely by reason of the coming into force of subsection (2) above but if, after any such change has occurred and before the company makes its next annual return, any other change in those particulars occurs, the company shall send to the registrar a notification in the prescribed form of any such earlier changes and the date on which they occurred at the same time as it notifies the registrar of the later changes in accordance with section 200(4).").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their amendments. With the leave of the House, I beg to move these consequential amendments en bloc.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
162 Clause 69, page 72, line 23, leave out ("issued more than one class of") and insert ("more than one class of issued").
163 Clause 70, page 73, line 23, leave out ("more than one class of members") and insert ("any class of members with such rights as are mentioned in subsection (1) above,").
164 Clause 70, page 73, line 26, leave out ("each") and insert ("any such").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their amendments. Clauses 69 and 70 require the disclosure by registration of additional information concerning classes of shares and members. Clause 69 requires the identification on share registers of the class of shares or membership. Clause 70 requires companies without a
1038
share capital to disclose information about rights attaching to different classes of membership. Amendment No. 162 to Clause 69 makes it clear that the new requirement to show a members' class does not apply if there is only one class in issue, which seems a highly sensible proposal. Amendments Nos. 163 and 164 ensure that the new requirements on companies without a share capital do not apply where the information is already stated in the memorandum and articles in order to avoid duplication. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
165 After Clause 70, insert the following new clause:
("Privileged information
.—(1) The following paragraph shall be substituted for paragraph (a) of section 175 of the 1948 Act (saving for disclosure of information by solicitors)—
"(a) by any person of any information which he would in an action in the High Court, or in Scotland, the Court of Session be entitled to refuse to disclose on grounds of legal professional privilege except, if he is a lawyer, the name and address of his client;".
(2) In section 446 of the 1948 Act (saving for disclosure of privileged information in criminal proceedings) for the words from "nothing in this Act" to the end there shall be substituted the words "or the Secretary of State, nothing in this Act shall be taken to require any person to disclose any information which he is entitled to refuse to disclose on grounds of legal professional privilege".
(3) In section 116(1) of the 1967 Act (saving for disclosure of information by solicitors) for the words "the production by a solicitor of a document containing a privileged communication made by or to him in that capacity" there shall be substituted the words "the production by any person of a document which he would in an action in the High Court or, in Scotland, the Court of Session be entitled to refuse to produce on grounds of legal professional privilege.").
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in the said amendment. With this amendment I should like to speak to Amendments Nos. 204 and 213. The net effect of these amendments is the introduction of a new clause which will supersede paragraphs 8 and 30 of Schedule 3 to the Bill, which extend to counsel legal professional privilege presently available to solicitors under Section 175 of the 1948 Act and Section 116 of the 1967 Act, and will also amend Sections 175 and 446 of the 1948 Act and Section 116 of the 1967 Act in so far as they relate to legal professional privilege.
Under the new clause a person shall not be required to disclose any information to the Secretary of State or an inspector appointed by him, or in proceedings instituted under the Companies Act 1948 by the Director of Public Prosecutions, by or on behalf of the Lord Advocate, or by the Secretary of State, or be required to produce a document under Part III of the 1967 Act, which he would in an action in the High Court or, in Scotland, the Court of Session, be entitled to refuse to produce on grounds of legal professional privilege. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
166 After Clause 71, insert the following new clause:
Voluntary liquidations
("Amendment of section 283 of the 1948 Act
.—(1) In section 283 of the 1948 Act (statutory declaration of solvency in a winding up)—

(a) in subsection (2)(a) for the words from "and is delivered" to "date" there shall be substituted the words "or on that date but before the passing of that resolution";

(b) the following subsection shall be inserted after subsection (2)—

"(2A) A declaration made by any directors of a company in compliance with subsection (2)(a) of this section shall be delivered to the registrar of companies before the expiry of the period of fifteen days immediately following the date on which the resolution for winding up the company is passed.";

(c) in subsection (4) the words "and delivered", in each place where they occur, shall cease to have effect; and

(d) the following subsection shall be inserted after subsection (4)—

"(4A) Where any declaration required to be delivered to the registrar by subsection (2A) of this section is not so delivered within the time prescribed by that subsection, the company and every officer in default shall be guilty of an offence and liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-fiftieth of the statutory maximum.".
(2) Subsection (1) above shall not apply in relation to any winding up commenced before the appointed day.
Lord Mackay of Clashfern: My Lords, I beg to move that this House doth agree with the Commons in their amendment. With this amendment, if I may, should like to take Amendment No. 231. The purpose of this new clause is to relax the provisions of Section 283 of the 1948 Act which relates to members' voluntary liquidation. At present for a liquidation to be a members' voluntary winding-up a statutory declaration of solvency must be made by the directors and delivered to the Registrar of Companies before the date of the resolution to wind up the company. The amendments will provide that for it to be a members' rather than a creditors' voluntary winding-up the declaration must be made before the resolution to wind up the company, but the period for delivery of the declaration to the registrar is extended, and the sanction for failure to deliver will be a criminal penalty rather than making what is really a members' voluntary winding-up into a creditors' winding-up.
Moved, That this House doth agree with the Commons in the said amendment—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
167 Insert the following new clause:
("Minimum notice of meeting for voluntary winding up
.—(1) For section 293(1) of the 1948 Act (obligation of company to call meeting of creditors for the day, or the day next following the day, of the company's meeting for voluntary winding up), there shall be substituted the following subsection—
"(1) Notwithstanding any power of the members, or of any particular majority of the members, to exclude or waive any other requirement of this Act or the
1040
company's articles with respect to the period of notice to be given of any meeting of the company, the company shall give at least seven days' notice of the meeting of the company at which the resolution for voluntary winding up is to be proposed; and the company shall in addition—

(a) cause a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which the said meeting of the company is to be held; and

(b) cause the notices of the said meeting of the creditors to be sent by post to the creditors simultaneously with the sending of the notices of the said meeting of the company."

(2) The following subsection shall be added at the end of that section—
"(7) Failure to give notice of the meeting of the company mentioned in subsection (1) above as required by that subsection shall not affect the validity of any resolution passed or other thing done at that meeting which would be valid apart from that subsection").
9.56 p.m.
Lord Mackay of Clashfern: My Lords, this new clause will require a company to give at least seven days' notice to its members of a meeting of the company in which it is proposed to go into voluntary liquidation. It will prevent the company going into liquidation and appointing a liquidator with insufficient notice to allow the creditors the opportunity to appoint their own nominee to realise the company's assets. If there is insufficient time for the creditors to realise what is happening, the members' nominee sometimes gets an undue preference. In that situation it is desirable to lengthen the time. That is the purpose of this new clause. I beg to move that this House doth agree with the Commons in their Amendment No. 167.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
168 Insert the following new clause:
"Conversion of creditors' voluntary winding up to members' voluntary winding up in certain circumstances.
(1) Subject to the following provisions of this section, where a company is being or has been wound up voluntarily and—

(a) the winding up is or was a creditors' winding up; and

(b) a statutory declaration which satisfies the requirements of subsection (2) below is delivered to the registrar of companies;

from the date on which that declaration is so delivered (referred to below in this section as the conversion date) the winding up shall be treated for all purposes of the 1948 Act as if it were or (in the case of one already concluded before that date) as if it had been a members' voluntary winding up and (in the case of any such winding up, whether concluded before or still in progress at that date) as if it had been a members' voluntary winding up at all times since its commencement.
(2) A statutory declaration made for the purposes of this section must be made by the directors of the company or, in the case of a company having more than two directors, by the majority of the directors, and must state—

(a) that a statutory declaration complying with the requirements of subsections (1) and (2)(b) of section 283 of the 1948 Act (statutory declaration of solvency

1041
in case of proposal to wind up voluntarily) was made by the directors (or by the majority of the directors) of the company in accordance with subsection (1) of that section within the five weeks immediately preceding the date of the passing of the resolution for winding up the company (as required by subsection (2)(a) of that section);

(b) that it was properly addressed to the registrar of companies, pre-paid and posted on a date within the period beginning with 7th April 1981 and ending with 1st August 1981; and

(c) that a letter so addressed and posted would in the ordinary course of post have been delivered to the registrar of companies before the date of the passing of the resolution for winding up the company.

(3) For the purposes of sections 283(3) and 288 of the 1948 Act (consequences of actual or prospective failure to pay debts in full within the period stated by the directors in the declaration of solvency) the period specified in the declaration under section 283 of that Act in the case of a winding up to which subsection (1) above applies shall be taken to have been twelve months from the commencement of the winding up unless the contrary is shown.
(4) Nothing in this section shall affect the validity of anything validly done in a winding up to which subsection (1) above applies before the conversion date.").
Lord Mackay of Clashfern: My Lords, the object of this clause is to allow certain voluntary windings-up to proceed as members' voluntary windings-up where, because of recent industrial action within the Civil Service, the statutory declaration of insolvency has not been delivered to the Registrar of Companies within the prescribed period; or circumstances which otherwise would require them to be changed at some expense and inconvenience into creditors' voluntary windings-up. This is just an unfortunate consequence of the recent trouble, and this clause is designed to remove that particular consequence. I beg to move that this House doth agree with the Commons in their Amendment No. 168.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
169 After Clause 73, insert the following new clause:
Amendment of Parts IV and V of the 1980 Act
("Exclusion from section 48 of the 1980 Act of arrangements made between certain group companies or by companies in liquidation.
.—(1) Section 48 of the 1980 Act (substantial property transactions involving directors, etc.) shall have effect subject to the following modifications.
(2) In subsection (1) at the beginning there shall be inserted the words "Subject to subsections (6), (7) and (8) below".
(3) The following subsections shall be inserted after subsection (6)—
"(7) Subsection (1) above shall not apply in relation to any arrangement for the acquisition of a non-cash asset—

(a) if the non-cash asset in question is to be acquired by a holding company from any of its wholly owned subsidiaries or from a holding company by any of its wholly owned subsidiaries or by one wholly owned subsidiary of a holding company from another wholly owned subsidiary of that same holding company; or

(b) if the arrangement is entered into by a company which is being wound up unless the winding up is a members' voluntary winding up.

(8) Subsection (1)(a) above shall not apply in relation to any arrangement whereby a person is to acquire an asset from a company of which he is a member if the arrangement is made with that person in his character as such member.".").
170 Insert the following new clause—
Additional exception from section 49 of the 1980 Act.
.—(1) In section 50 of the 1980 Act (certain transactions exempted from section 49 of that Act) the following subsection shall be inserted after subsection (2)—
"(2A) Without prejudice to any other provision of this section, section 49(1)(a) above shall not prohibit any company from making a loan to a director of the company or of its holding company if the aggregate of the relevant amounts does not exceed £2,500."
(2) In section 51 of that Act (definition of "relevant amounts") in subsection (1) for the words "by subsection (3) (a)" there shall be substituted the words "by subsection (2A) or (3)(a)"; and at the end of that subsection there shall be inserted the words—
"Where the relevant exception is the exception provided by subsection (2A) references in this section to a person connected with a director shall be disregarded."
Lord Trefgarne: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 169 and 170. I should furthermore like to speak to Amendments Nos. 223, 224, 225, 226 and 227. This group of amendments introduces certain relaxations of the provisions of Part IV of the Companies Act 1980 dealing with the duties of directors and conflicts of interest. I am very willing to go into further details, but, if your Lordships would prefer to leave it at that, I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Trefgarne.)
On Question, Motion agreed to.

COMMONS AMENDMENT
171 After Clause 73, insert the following new clause—
"International bonds
.—(1) Section 71 of the 1980 Act (exclusion of things done in connection with international bonds from prohibition on insider dealing) shall have effect subject to the following modifications.
(2) In subsection (1)—

(a) after the word "debenture", in the first place where it occurs, there shall be inserted the words "or any right to subscribe for, call for or make delivery of any debenture";

(b) in paragraph (a)(ii) for the words "before the date on which it is decided" there shall be substituted the words "before the decision is taken"; and

(c) in paragraph (b) after the word "debenture", in both places where it occurs, there shall be inserted the words "or right".

(3) The following subsection shall be inserted after subsection (1)—
"(1A) Where an individual holds unpublished price sensitive information in relation to any securities but by virtue of subsection (1) above he is not prohibited by section 68 above from doing anything in relation to those securities, he shall not be prohibited by virtue of his holding that information by section 70(2) above (prohibition on counselling persons to deal on stock exchanges outside Great Britain, etc.) from doing any other thing in relation to those securities.".
(4) In subsection (2)—

(a) in paragraph (b) of the definition of "international bond issue" for the words "are so offered"

1043
there shall be substituted the words "are or are to be so offered"; and

(b) the following words shall be inserted after the definition of 'issue manager", that is to say, "and 'off-market dealer' has the meaning given by section 70(3) above.".

(5) The following subsections shall be inserted after subsection (2)—
"(3) The Secretary of State may by regulations made by statutory instrument make provision—

(a) permitting persons of any specified class to be treated as issue managers for the purposes of subsection (1) or (1A) (or both) of this section;

(b) permitting persons of any specified class to be treated as off-market dealers for those purposes;

(c) permitting an issue of international securities of any specified class to be treated as an international bond issue for those purposes;

(d) extending the exemptions conferred by subsection (1) or (1A) above (or both) for things done in relation to other advertised securities or other advertised securities of any specified class;

(e) amending or disapplying paragraph (i) or (ii) (or both) of subsection (1)(a) above in relation to any international bond issue or any international bond issue of a specified class.

(4) In subsection (3) above "international securities" means any securities (whether listed or advertised or other) which are in any way connected with a country outside Great Britain, for example, securities issued by a body which is incorporated or resident outside Great Britain or which are denominated in a currency other than sterling or which are dealt in by bodies incorporated or resident outside Great Britain or by individuals so resident.
(5) Regulations under subsection (3) above—

(a) may make different provision for different cases or classes of case and may contain such incidental and supplementary provisions as the Secretary of State thinks fit;

(b) shall not be made unless a draft of the instrument containing them has been laid before Parliament and approved by resolution of each House of Parliament.".

Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 171. Your Lordships will see that this amends Section 71 of the 1980 Act. This excludes certain dealings in the international bond market from the prohibition which we discussed at great length at earlier stages in this particular Bill, and I remember, in 1980, and at earlier stages on the vexed question of insider dealing. The new clause amends Section 71 in two major ways. First of all it puts right certain technical defects in the old section. The result of these defects is that the section as it stands fails to achieve completely the intended objective of providing a defence for certain specified activities in the international bond market.
Secondly, we are amending Section 71 because the clause gives to the Secretary of State power to make certain further amendments to Section 71 by order subject to the affirmative resolution of both Houses of Parliament. I recognise that it is unusual to take powers to make secondary legislation to amend criminal provisions, but the circumstances are very unusual and I hope that your Lordships will permit me to explain briefly why this is so.
Even in the 18 months or so since Section 71 was enacted in the 1980 Act, there have been considerable changes in the way that the international issue market
1044
has been operating. This particular market is confined to professionals who are, in almost all cases, large financial institutions who are well aware of the risks that they are taking. There is no danger in this aspect to the unsophisticated saver or small investor.
The market has developed very much in the last 18 months, and seems certain to continue to do so in the future, in new and unpredictable directions. It would be wrong for restrictions which are designed to protect the small investor and saver to prevent large institutions in the City of London from playing a part in a market which began here in London and in which the City is pre-eminent. Equally, it is clear that opportunities for primary legislation will be too infrequent to allow the law to catch up with any rapid commercial developments, especially in this specialised market. Thus, subsection (5) of the new clause enables the Secretary of State to amend the section by regulations in various specified ways. None of the regulations can come into force until it has been approved by affirmative resolution of both Houses.
I wish to stress the limited scope of these powers. We are not seeking to widen our original concept of the international bond market to give complete freedom, complete licence and complete carte blanche to the institutions in the City to deal whenever they hold inside information. Far from it. We are seeking a flexible way of keeping the law in step with detailed developments in the way that the international issues and bond markets operate. I apologise for going at such length into the matter, but this is a very specialised market and I thought the House merited an explanation of why we have taken this step.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
Lord Davies of Leek: My Lords, this demonstrates again what we said earlier today about the importance of this measure. As I see it, the lifting of exchange control has created a completely different situation in the international bond system. It would be remiss of me to delay the House at this late hour, but I should have liked rather more discussion of this whole issue. I do not seek more explanation from the Minister, but we should have had more time to discuss the point. Perhaps at a later time we shall be able to deal with this.
Lord Lyell: I appreciate that this is a very complicated subject, my Lords. I have several pages more of supplementary briefing, but if the noble Lord has further questions to raise, then, apart from the myriad of opportunities he has to question me and my noble friends, if he wishes any aspect of the bond market explained, either formally or informally, I shall be more than happy to write to him.
Lord Davies of Leek: My Lords, I am obliged to the noble Lord for that kind reply.
On Question, Motion agreed to.

COMMONS AMENDMENTS
172 After Clause 73 insert the following new clause:
("Old public companies.
Supplemental
. Subject to section 34(l) of this Act, any reference in this Act to a public company or to a company other

1045
than a private company shall unless the context otherwise requires be construed as including a reference to an old public company (within the meaning of section 8 of the 1980 Act) and any reference to a private company shall be construed accordingly.").
173 Clause 78, page 77, line 40, leave out (","public company" and "the statutory maximum"") and insert ("and "public company"").
Lord Lyell: My Lords, on behalf of my noble and learned friend Lord Mackay, and with the leave of the House, I beg to move that this House doth agree with the Commons in their Amendments Nos. 172 and 173. These are consequential on amendments which he moved earlier.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
174 Clause 79, page 78, line 12, leave out ("35 to 41") and insert ("(Temporary extension of power to require company to change its name), 35 to 41, (Merger relief)and (Conversion of creditors' voluntary winding up to members' voluntary winding up in certain circumstances)").
175 Clause 79, page 78, line 14, after ("instrument") insert ("and different days may be appointed for different purposes").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 174 and 175. Amendment No. 174 provides that the new clauses introduced by Amendments Nos. 30 and 68, which we discussed earlier, shall come into effect on the date of Royal Assent. It is essential that the clauses which make special provision for the extension of time within which certain companies' names may be changed—that was Amendment No. 30—and for the conversion of creditors' voluntary liquidations into members' voluntary liquidations, which was explained lucidly by my noble and learned friend Lord Mackay, to mitigate certain effects of the industrial action of the Companies Registration Office, should come into operation without delay. These provide that they shall come into force on the day of Royal Assent rather than on a day to be appinted. Amendment No. 175 provides in Clause 106(3) for the commencement of the provisions of the Bill on days to be appointed by statutory instrument, except in the case of those provisions which come into force on Royal Assent. These were the two earlier amendments that I mentioned.
Amendment No. 175 allows different days to be appointed for different purposes in respect of any particular provision contained in the Bill. That appears to provide licence, but in fact it will be carefully regulated and it will provide flexibility to permit, for example, the provisions of Part I to be commenced for overseas companies at a time different from their commencement for British companies. Amendment No. 175 will facilitate the process of commencement. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
176 Schedule 1, page 83, line 5, at end insert ("(82)").
177 Schedule 1, page 83, line 17, at end insert ("(8A)").
178 Schedule 1, page 85, line 24, at end insert ("(8A)").
179 Schedule 1, Page 86, line 41, at end insert—
("(8A) Other creditors including taxation and social security (Format 1, items E.8 and H.8 and Format 2, item C.8). The amount for creditors in respect of taxation and social security shall be shown separately from the amount for other creditors.").
Lord Lyell: My Lords, with the leave of your Lord-ships' House, I beg to move that this House doth agree with the Commons in their Amendments Nos. 176 to 179. These amendments require the amount for creditors in respect of taxation and social security to be shown separately from the amount for "other creditors", as the English text of the directive was found to be defective in its reference to:
"other creditors including tax and social security".
These are minor drafting amendments in an accountancy sense. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
180 Page 96, line 38, at beginning insert ("Subject to the qualification mentioned below").
181 Page 96, line 45, at end insert—
("The method chosen must be one which appears to the directors to be appropriate in the circumstances of the company").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 180 and 181. These two amendments were made in Committee in another place and they meet an undertaking that was given in your Lordships' House on Report. I hope that the noble Lord, Lord Bruce of Donington, would agree that the accountancy bodies could be encapsulated into what he called the CCAB; I cannot exactly recall the name, but I refer to the Central Council of Accountancy Bodies. The undertaking was to discuss with the accountancy bodies their concern over the fact that the accounting standard dealing with stock valuation, while not ruling out the use of what is attractively known as the LIFO (last in, first out) method of valuing stock, which is expressly permitted by paragraph 27 of Schedule 1, would not normally be appropriate. The accountancy bodies were concerned that paragraph 27(1) might be read as giving directors absolute freedom to use the last in, first out method in any circumstances that they chose. These two amendments seek to dispel the fears which were expressed very strongly by the noble Lord, Lord Bruce, and by other members of the accountancy body. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
182 Page 97, line 17, at beginning insert ("Subject to sub-paragraph (4A) below").
183 Page 97, line 23, leave out from ("date") to end of line 28.
184 Page 97, line 28, at end insert—
("(4A) The relevant alternative amount may be determined by reference to the most recent actual purchase price or production cost before the balance sheet date of assets of any class included under the item in question instead of by reference to their replacement cost as at that date, but only if the former appears to the directors of the company to constitute the more appropriate standard of comparison in the case of assets of that class.").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 182 to 184. These three amendments result from further consideration of paragraphs 27(3) and (4) of Schedule 1, and they implement the fourth directive more accurately in respect of calculating the difference between the value of stocks and what are attractively called fungible assets arrived at on the basis of the methods mentioned in paragraph 27(2) and the last known market value prior to the balance sheet date. I hope that your Lordships do not think that that is entire gobbledygook. I am sure that my noble and learned friend could give a much more precise explanation than I could of the fascinating term "fungible assets". I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
185 Page 98, line 20, leave out ("either item B.III or item C.III') and insert ("item B.III").
186 Page 98, line 29, at end insert—
("(3A) Investments of any description falling to be included under item C.III of either of the balance sheet formats set out in Part I of this Schedule may be included at their current cost.").
10.10 p.m.
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 185 and 186. These two amendments, I am given to understand, are minor amendments; although no amendments of this technical nature can be classified as minor. They provide that current asset investments, if the accounts are drawn up in accordance with the alternative accounting rules, may be included as current costs only and not as now allowed by paragraph 31(3) at a market value or at a valuation considered appropriate by the directors.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
187 Page 102, line 29, leave out from ("item'') to end of line and insert ("either—").
188 Page 102, line 32, leave out ("and") and insert ("or").
189 Page 102, line 33, at end insert—
("(leaving out of account in either case any provisions for depreciation or diminution in value)").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 187, 188 and 189. These minor amend-
1048
ments are designed to resolve any doubt that the information required to be disclosed under paragraph 41(1) and (2) in respect of fixed asset movements relates not to net book values but to gross book amounts.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
190 Page 104, line 11, at end insert—
("(3) Particulars shall be given of each provision included in the item "other provisions" in the company's balance sheet in any case where the amount of that provision is material.").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 190. This is a minor addition to paragraph 46 of Schedule 1, which implements a fourth directive requirement.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
191 Page 104, line 17, leave out from ("sheet") to ("are") in line 19 and insert—
("there shall be stated—
(a) the aggregate amount of any debts included under that item which").
192 Page 104, line 22, leave out from ("year") to ("are") in line 23, and insert—
("and
(b) the aggregate amount of any debts so included which").
193 Page 104, line 25, leave out ("shall be stated").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 191, 192 and 193. These are technical amendments which enable us to comply fully with the provisions of the Fourth Directive. They make it clear that the aggregate amounts of the debts payable both by instalments and other than by instalments are to be disclosed separately in the Notes to the Accounts.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
193A Page 106, line 14, after ("(c)") insert ("or (Relaxation of section 42 restrictions for private companies)").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 193A. This is an amendment to the disclosure provisions in Schedules 1 and 2 to reflect the new provisions whereby a company may give financial assistance for the purchase of its own shares.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
194 Page 109, line 38, leave out from first ("of") to end of line 39 and insert ("any of the following provisions, that is to say—

(a) sections 3 and 4 of the Companies Act 1967 (statement in notes to a company's accounts of proportion of share capital of subsidiaries or certain other bodies corporate held by that company, etc.);

(b) sections 54 and 56 of the Companies Act 1980 (particulars of certain loans etc. to directors and others to be disclosed in notes to a company's accounts); and

(c) paragraphs 42 and 46 above.").

Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 194. This amendment adds to the items in paragraph 58(3) of Schedule 1 which provides that certain amounts required to be disclosed are not subject to the requirement in paragraph 58(2) that corresponding figures for the preceding financial year are to be stated.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
195 Page 111, line 3, at end insert—
("64A.—(l) Notwithstanding paragraph 62 above, the consolidated accounts prepared by a holding company may deal with an investment of any member of the group in the shares of any other body corporate by way of the equity method of accounting in any case where it appears to the directors of the holding company that that body corporate is so closely associated with any member of the group as to justify the use of that method in dealing with investments by that or any other member of the group in the shares of that body corporate.
(2) In this paragraph, references to the group, in relation to consolidated accounts prepared by a holding company, are references to the holding company and the subsidiaries dealt with by the accounts.").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 195. The amendment allows the established practice of equity accounting to continue in the United Kingdom as it was put to us that the interactive effect of paragraphs 12(a), 34, and 62 of Schedule 1 would prevent the use of the present practice of equity accounting in drawing up statutory accounts. This has never been the intention of the Government and to avoid this we seek to move this amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
196 Schedule 1, page 115, line 27, at end insert—
("Purchase price
87A. References in this Schedule (however expressed) to the purchase price of any asset of a company or of any raw materials or consumables used in the production of any such asset shall be read as including references to any consideration (whether in cash or otherwise) given by the company in respect of that asset or in respect of those materials or consumables (as the case may require).
Realised profits
87B. Without prejudice to—

(a) the construction of any other expression (where appropriate) by reference to accepted accounting principles or practice; or

(b) any specific provision for the treatment of profits of any description as realised;

it is hereby declared for the avoidance of doubt that references in this Schedule to realised profits, in relation to a company's accounts, are references to such profits of the company as fall to be treated as realised profits for the purposes of those accounts in accordance with principles generally accepted with respect to the determination for accounting purposes of realised profits at the time when those accounts are prepared.").
Lord Lyell: My Lords, the first paragraph in this amendment results from an undertaking given by the Government in this House to, so far as I recall, the noble Lord, Lord Bruce of Donington, that they would deal with the problem that the words "purchase price or production cost", as used in Schedule 1, are not wholly appropriate for the amount to be included in the accounts in respect of certain assets such as debts by referring to any consideration given in respect of the asset. We reflected further on this and had further discussions with the accountancy bodies and the Law Society. We hope the amendment makes it quite clear that the term "realized" is to be construed in an accounting rather than a tax context. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
197 Schedule 1, page 116, line 44, at end insert—
("Wholly owned subsidiaries
91A. In this Schedule, "wholly owned subsidiary" has the same meaning as it has for the purposes of section 150 of this Act.").
Lord Lyell: My Lords, this amendment seeks to clarify the position. It provides that the definition of "wholly-owned subsidiary" has the same meaning as it has for the purposes of Section 150 of the master Act, the Companies Act. I beg to move that this House doth agree with the Commons in their Amendment No. 197.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
198 Schedule 2, page 118, line 3, at end insert—
("( ) in paragraph 8(1)(c) for the words from "provisos (b) and (c)" to the end there shall be substituted the words "section 42(3)(b) or (c) or (Relaxation of section 42 restrictions for private companies) of the Companies Act 1981;";
Lord Lyell: My Lords, I spoke to this amendment earlier. I beg to move that this House doth agree with the Commons in their Amendment No. 198.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
199 Schedule 2, page 118, line 13, at end insert—
("( ) in paragraph 12(1)(d), for the word "provided", there shall be substituted the words "set aside";
Lord Lyell: My Lords, this is a technical amendment to Schedule 2 of the Bill, which provides that in paragraph 12(1)(d) of the old Schedule 8, which is to be renumbered Schedule 8A, the words "set aside" shall be substituted for the word "provided". This is an accountancy concept, and we believe it clarifies the Bill. I beg to move that this House doth agree with the Commons in their Amendment No. 199.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
200 Schedule 2, page 119, line 16, after ("Act") insert ("and the repeal of subsections (1)(b) and (2) of that section by section 16(2)(b) of this Act.").
Lord Lyell: My Lords, in moving Amendment No. 200, with the leave of your Lordships' House, I would wish to speak also to Amendment No. 241. Amendment No. 200 is a technical amendment rectifying an omission in paragraph 5(4) of Schedule 2, and Amendment No. 241 is a consequential amendment upon that. I beg to move that this House doth agree with the Commons in their Amendment No. 200.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
201 Schedule 2, page 120, line 1, leave out ("41, 42, 43") and insert ("41(1)(a), 42, 43(a)(i), (aa) and (b)").
Lord Lyell: My Lords, with the leave of your Lordships' House, I should like to move Amendment No. 201 and to speak also to Amendments Nos. 217, 218, 219, 221, 236, 237 and 238. My noble friend the Minister advises me that I should be speaking to Amendment No. 220 as well. My Lords, all these technical amendments relate to Section 39(4) of the Companies Act 1980, which provides that all provisions are to be treated as realised losses other than provisions in respect of diminutions in value of a fixed asset arising on a revaluation of all the fixed assets. They are technical amendments, and they all fall into line after Amendment No. 201. I beg to move that this House doth agree with the Commons in their Amendment No. 201.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
202 Schedule 3, page 121, leave out lines 1 to 4 and insert—
("3A. In section 106 (registration of charges on property in England of companies incorporated outside England) for the word "England", in the third place where it occurs, there shall he substituted the words "Great Britain".
3B. In both section 124 and section 125 the following subsection shall be substituted for subsection (3)—
"(3) If a company fails to comply with this section, the company and every officer of the company who is
1052
in default shall be liable on summary conviction to a fine not exceeding the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-tenth of the statutory maximum."
This paragraph shall not have effect in relation to any offence committed before the appointed day.").
Lord Mackay of Clashfern: My Lords, it gives me particular pleasure to bring forward the first paragraph of Amendment No. 202, since it removes an inconsistency between the laws of England and Scotland in relation to the registration of charges, and is the implementation of an undertaking which was given to my noble friend Lord Selkirk at the Committee stage in your Lordships' House. Paragraph 3B of the amendment provides for an increase in the maximum fine for failure to render an annual return to the registrar to the statutory maximum. I beg to move that this House doth agree with the Commons in their Amendment No. 202.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
203 Schedule 3, page 121, line 22, after ("words") insert ("(1)").
204 Schedule 3, page 121, leave out lines 23 and 24.
205 Schedule 3, page 121, line 24, at end insert—
("8A. In section 187 (restrictions on undischarged bankrupts acting as directors, etc.) after the words "acts as director" there shall be inserted the words "or liquidator" and after the words "is concerned in the" there shall be inserted the words "promotion, formation or"").
Lord Mackay of Clashfern: My Lords, if I may, I should like to take Amendments Nos. 203, 204 and 205 together. They are consequential upon amendments to which I have already spoken. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Mackay of Clashfern.)
On Question, Motion agreed to.

COMMONS AMENDMENT
206 Schedule 3, page 21, line 25, leave out ("of the 1948 Act").
Lord Lyell: My Lords, this is a technical amendment. It deletes a superfluous reference to the 1948 Act. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
207 Schedule 3, page 122, line 14, after ("Act)") insert—
("(a) in subsection (3), the following words shall be inserted after paragraph (b), that is to say, "and
(c) in an appropriate case, if the company wishes to be registered with the Welsh equivalent of "public limited company" or, as the case may be, "limited" as the last words or word of its name, a statement to that effect."; and
(b)").
208 Schedule 3, page 122, line 24, leave out from ("if") to ("cwmni") in line 27 and insert ("the company has

1053
delivered a statement under section 382(3)(c) of this Act to the registrar").
209 Schedule 3, page 122, leave out lines 32 to 34 and insert—
("if the company has delivered a statement under section 382(3)(c) of this Act to the registrar, "cyfyngedig"").
Lord Lyell: My Lords, with the leave of your Lordships I should like to move Amendments Nos. 207, 208 and 209 together. These three amendments permit a joint stock company registering under Part 8 of the 1948 Act to use the Welsh equivalent of what we call a public limited company or "limited" as the last words or word of its name if the registered office of that company is to be situated in Wales. We consider that as drafted paragraph 13 of Schedule 3 makes the use of the Welsh equivalent compulsory in such cases. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
210 Schedule 3, page 123, line 14, at end insert—
("17A. In section 455 after the definition of "share warrant" there shall be inserted the following definition—
""statutory maximum" has the meaning given by section 87(1) of the Companies Act 1980;"").
211 Schedule 3, page 124, line 13, at end insert—
("25A. In sections 25, 27 and 29 of the 1967 Act (restrictions on directors' dealing in options in securities of own companies and registration of their interests in such securities) any reference (however expressed) to any price paid, given or received in respect of any interest in shares or debentures shall be construed as including a reference to any consideration other than money given or received in respect of any such interest.
25B.—(1) In section 28 of the 1967 Act (meaning of "interests in shares and debentures" for purposes of section 27 of that Act) the following subsections shall be substituted for subsections (1) to (4)—
"(1) The provisions of this section shall apply in determining for the purposes of section 27 of this Act whether a person has an interest in shares or debentures.
(2) Any reference to an interest in shares or debentures shall be read as including a reference to any interest of any kind whatsoever in shares or debentures; and accordingly there shall be disregarded any restraints or restrictions to which the exercise of any right attached to the interest is or may be subject.
(3) Where any property is held on trust and any interest in shares or debentures is comprised in that property, any beneficiary of that trust who, apart from this subsection, does not have an interest in the shares or debentures shall be taken to have such an interest (but this subsection is without prejudice to the following provisions of this section).
(4) A person shall be taken to have an interest in shares or debentures if—

(a) he enters into a contract for their purchase by him (whether for cash or other consideration); or

(b) not being the registered holder, he is entitled to exercise any right conferred by the holding of those shares or debentures or is entitled to control the exercise of any such right.

(4A) A person shall be taken to be interested in shares or debentures if a body corporate is interested in them and—

(a) that body corporate or its directors are accustomed to act in accordance with his directions or instructions; or

(b) he is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of that body corporate.

(4B) Where a person is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of a body corporate and that body corporate is entitled to exercise or control the exercise of any of the voting power at general meetings of another body corporate (the "relevant voting power"), then, for the purposes of subsection (4A)(b) above, the relevant voting power shall be taken to be exercisable by that person.
(4C) A person shall be taken to have an interest in shares or debentures if, otherwise than by virtue of having an interest under a trust—

(a) he has a right to call for delivery of the shares or debentures to himself or to his order; or

(b) he has a right to acquire an interest in shares or debentures or is under an obligation to take an interest in shares or debentures;

whether in any case the right or obligation is conditional or absolute.
(4D) For the purposes of subsection (4)(b) above, a person shall be taken to be entitled to exercise or control the exercise of any right conferred by the holding of shares or debentures if he has a right (whether subject to conditions or not) the exercise of which would make him so entitled or is under an obligation (whether so subject or not) the fulfilment of which would make him so entitled.
(4E) A person shall not by virtue of subsection (4)(b) above be taken to be interested in any shares or debentures by reason only that he has been appointed a proxy to vote at a specified meeting of a company or of any class of its members and at any adjournment of that meeting or has been appointed by a corporation to act as its representative at any meeting of a company or of any class of its members.
(4F) Without prejudice to subsection (2) above, rights or obligations to subscribe for any shares or debentures shall not be taken for the purposes of subsection (4C) above to be rights to acquire, or obligations to take, any interest in shares or debentures."
(2) Subsection (3) of section 27 of the 1967 Act (periods during which any obligation imposed by that section must be fulfilled) shall not apply in relation to any obligation imposed on a director of a company by subsection (1)(a) of that section to notify the company of any interest of his in shares or debentures if that obligation arose on the appointed day by virtue only of the coming into force of sub-paragraph (1) above; but the director must fulfil any such obligation—

(a) if he knows of the existence of that interest on the appointed day, within the period of ten days next following that day;

(b) in any other case, within the period of five days next following the day on which the existence of that interest conies to his knowledge;

(disregarding in reckoning that period any day that is a Saturday or Sunday or a bank holiday in any part of Great Britain).").
212 Schedule 3, page 123, line 26, at end insert ("(whether as it has effect in relation to an investigation under any of sections 164 to 166 of the principal Act").
213 Schedule 3, page 123, leave out lines 33 to 35.
214 Schedule 3, page 125, line 1, at end insert—
("32A. In section 29(1) of the 1976 Act (register of disqualification orders)—

(a) for the words from "that a person" to "in the order" there shall be substituted the words "under section 188 of the Act of 1948 or section 9 of the Insolvency Act 1976;"; and

(b) the words from "This subsection" to the end shall cease to have effect.").

Lord Lyell: My Lords, with your Lordships' leave, I wish to move Amendments Nos. 210 to 214 inclusive. These are all consequential amendments and have been spoken to at an earlier stage. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
215 Schedule 3, page 125, line 23, at end insert ("and the following subsection shall be added at the end of that section—
(" "(13) In relation to any offer to allot any securities required by subsection (1) above or by any provision to which subsection (3) above applies references in this section (however expressed) to the holder of shares of any description shall be read as including references to any person who held shares of that description on any day within the period of twenty-eight days ending with the day immediately preceding the date of the offer."").
216 Schedule 3, page 125, line 30, leave out paragraph 38 and insert—
("38.—(1) In section 24 (valuation of non-cash consideration before allotment), for the words from the beginning of subsection (2) to "that class" there shall be substituted the words "(2) Subject to subsection (2A) below, subsection (1) above shall not apply to the allotment of shares by a company in connection with—
(a) an arrangement providing for the allotment of shares in that company on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to that company or the cancellation of all or some of the shares, or of all or some of the shares of a particular class, in another company (with or without the issue to that company of shares, or of shares of any particular class, in that other company);".
(2) The following subsection shall be inserted after subsection (2) of that section—
"(2A) Subsection (2)(a) above does not exclude the application of subsection (1) above to the allotment of shares by a company in connection with any such arrangement as is there mentioned unless it is open to all the holders of the shares in the other company in question or, where the arrangement applies only to shares of a particular class, to all the holders of shares in that other company of that class, to take part in the arrangement.
In determining whether that is the case, shares held by or by a nominee of the company proposing to allot the shares in connection with the arrangement, or by a nominee of a company which is that company's holding company or subsidiary or a company which is a subsidiary of its holding company, shall be disregarded."
(3) In subsection (3) of that section—

(a) for the words from the beginning to "those purposes" there shall be substituted the words "For the purposes of subsection (2)(b) above"; and

(b) after the word "shares", in the last place where it occurs, there shall be inserted the words "or other securities".

(4) The following subsection shall be inserted after subsection (11) of that section—
"(11A) It is hereby declared for the avoidance of doubt that subsection (1) above does not apply by reference to the application of an amount for the time being standing to the credit of any of a company's reserve accounts or to the credit of its profit and loss account in paying up (to any extent) any shares allotted to members of the company or any premiums on any shares so allotted; and in relation to any such allotment references in this section to the consideration for the allotment do not include any such amount so applied.".
(5) In subsection (12) the following paragraph shall be inserted before paragraph (a)—
"(aa) In this section 'arrangement' means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with section 206 or 287 of the 1048 Act)."".
Lord Lyell: My Lords, these amendments provide a relaxation from the requirements in Section 24 of the 1980 Act for an independent valuation of a consideration which is not in cash which is to be used in a takeover or merger for schemes of arrangement which are defined in the Bill for the purposes of merger of companies, as well as for mergers in which securities other than shares are involved. The amendments also make clear that the valuation requirement does not apply when a company use capital reserves to pay up what they call bonus shares. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
217 Schedule 3, page 126, line 12, at beginning insert ("(1)").
218 Schedule 3, page 126, line 13, after ("distribution") insert ("(a)").
Lord Lyell: My Lords, with the leave of the House I beg to move Amendments Nos. 217 and 218.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
219 Schedule 3, page 126, line 16, at end insert—
("and
(b) after the words "fixed assets" there shall be inserted the words "or of all the fixed assets other than goodwill.
(2) The following subsection shall be inserted after that subsection —
"(4A) Subject to section 43(7A) of this Act, any consideration by the directors of a company of the value at any particular time of any fixed asset of the company shall be treated as a revaluation of that asset for the purposes of determining whether any such revaluation of the company's fixed assets as is required for the purposes of the exception from subsection (4) above has taken place at that time; but where any such assets which have not actually been revalued are treated as revalued for those purposes by virtue of this subsection that exception shall only apply if the directors are satisfied that their aggregate value at the time in question is not less than the aggregate amount at which they are for the time being stated in the company's accounts.").
Lord Trefgarne: My Lords, this is a consequential amendment and I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Trefgarne.)
As an amendment to the amendment:
219B Line 17, leave out ("are satisfied") and insert ("determine by way of resolution").
Lord Ponsonby of Shulbrede: I beg to move.
On Question, amendment to the amendment negatived.
On Question, Motion agreed to

COMMONS AMENDMENTS
220 Schedule 3, rage 126 leave out lines 23 and 24 and insert—
("(a) in subsection (2)—

(i) the words "or filed", wherever occurring, shall cease to have effect; and

1057

(ii) in paragraph (b) for the word "proper" there shall be substituted the word "reasonable";

(aa) in subsection (3)(d) the words from "or delivered' to the end shall cease to have effect;

(aaa) the following subsection shall be inserted after subsection (7)—

"(7A) Where subsection (3)(a), (5)(a) or (6)(a) above applies to the relevant accounts, section 39(4A) of this Act shall not apply for the purposes of determining whether any revaluation of the company's fixed assets affecting the amount of any of the relevant items as stated in those accounts has taken place, unless it is stated in a note to those accounts—

(a) that the directors have considered the value at any time of any fixed assets of the company without actually revaluing those assets;

(b) that they are satisfied that the aggregate value of those assets at the time in question is or was not less than the aggregate amount at which they are or were for the time being stated in the company's accounts; and

(c) that the relevant items affected are accordingly stated in the relevant accounts on the basis that a revaluation of the company's fixed assets which by virtue of section 39(4A) included the assets in question took place at that time."; and").

221 Schedule 3, rage 126 line 29, after ("words") insert ("",or filed" and the words").
222 Schedule 3, rage 126 line 35, leave out from beginning to end of line 37 and insert—
("(b) the redemption or purchase of any of the company's own shares out of capital (including the proceeds of any fresh issue of shares) or out of unrealised profits in accordance with Part III of the Companies Act Act 1981;"").
223 Schedule 3, page 127, line 46, leave out ("and").
224 Schedule 3, page 128, line 6, at end insert ("and
(d) in subsection (6)(c) for the word "or", in the second place where it occurs, there shall be substituted the word "and".").
225 Schedule 3, page 128 line 8, after ("accounts)"), insert—
("(a) the following subsection shall be inserted after subsection (2)—
"(2A) Subsection (2) above does not apply, in relation to the accounts prepared by any company in respect of any relevant period, to transactions, arrangements and agreements made by the company or any of its subsidiaries for any officer of the company if the aggregate amount outstanding at the end of that period under the transactions, arrangements and agreements so made for that officer does not exceed £2,500."; and
(b)").
226 Schedule 3, page 128 line 12, at end insert—
("48A. In section 58 (transactions, etc. excluded from sections 54 and 57) the following subsection shall be substituted for subsection (3)—
"(3) Subsections (1)(c) and (2)(c) of section 54 above do not apply, in relation to any accounts prepared by a company in respect of any relevant period, to any transaction or arrangement with a company or any of its subsidiaries in which a director of the company or of its holding company had, directly or indirectly, a material interest if—

(a) the value of each transaction or arrangement within subsection (1)(c) or (2)(c), as the case may be, in which that director had, directly or indirectly, a material interest and which was made after the commencement of that relevant period with the company or any of its subsidiaries; and

(b) the value of each such transaction or arrangement which was made before the commencement of that period less the amount (if any) by which the liabilities of the person for whom the transaction or arrangement was made have been reduced;
1058
did not at any time during the relevant period exceed in the aggregate £1,000 or, if more, did not exceed £5,000 or one per cent. of the value of the net assets of the company preparing the accounts in question as at the end of the relevant period for those accounts, whichever is the less.".".

227 Schedule 3, page 128 line 20, at end insert—
("49A. In section 64(4) (application of section 28 of the 1967 Act to section 64(3)) for the words "subsection (3)(b)" there shall be substituted the words "subsections (4A) and (4B)".".
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 220 to 227 en bloc.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
228 Page 128, line 34, at end insert:
("52A. In section 72 (penalties for breach of sections 68 and 69 of the 1980 Act) for the words "or 69", in both places where they occur, there shall be substituted the words "69 or 70".").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 228. This amendment rectifies a small omission in Section 72 of the 1980 Companies Act. I beg to move.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
229 Page 129, line 14, at end insert:
"Transport Act 1981 (c. 56)
55A. In paragraph 10 of Schedule 6 to the Transport Act 1981 (amendments of the Harbours Act 1964) for each reference to the Companies Acts 1948 to 1980 there shall be substituted a reference to the Companies Acts 1948 to 1981.").
Lord Lyell: My Lords, this amendment updates references in Schedule 6(10) of the Transport Act 1981. These refer at present to the Companies Acts 1948 to 1980. We hope that this reference will be able to include a reference to this particular Bill when it is enacted.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
230 Schedule 4, page 130, line 23, column 3, at end insert:
("In section 174(1) the words from "and that" to "Act".").
231 Schedule 4, page 130, line 30, column 3, at end insert:
("In section 283(4), the words "and delivered" in each place where they occur.").
Lord Lyell: I beg to move that this House doth agree with the Commons in their Amendments Nos. 230 and 231. These are consequential and have been spoken to earlier.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
232 Page 130, line 35, column 3, at end insert:
("In Schedule 1,—Regulation 10 of Table A; in Regulation 88 of Table A and Article 38 of Table C, the words "or under section 28 of the Companies Act 1976".".
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 232. This amendment provides for the deletion of certain provisions of both Table A and Table C of the 1948 Companies Act which are consequent upon repeals made in the Bill before your Lordships.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
233 Page 130, line 40, column 3, leave out from beginning to ("paragraphs") in line 42.
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 233. This is a consequential amendment.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
233A Page 130, line 45, column 3, at end insert:
("Sections 33 and 34").
Lord Lyell: I beg to move that this House doth agree with the Commons in their Amendment No. 233A. This is consequential to an amendment moved by my noble friend the Minister when he was speaking to Amendment No. 134. I think that must have been considerably before dinner.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENT
234 Page 131 line 5, column 3, leave out line 5 and insert:
("Sections 26, 27 and 28. In section 29(1), the words from "This subsection applies" to the end.").
Lord Lyell: I beg to move that this House doth agree with the Commons in their Amendment No. 234. This carries on where Amendment No. 232 left off. It lists certain repeals to the Companies Act 1976 which have been made in the Bill before your Lordships.
Moved, That this House doth agree with the Commons in the said amendment.—(Lord Lyell.)
On Question, Motion agreed to.

COMMONS AMENDMENTS
235 Schedule 4, page 131, line 13, column 3, leave out from ("of") to end of line 14 and insert—
("the 1948 Act, Regulation 88 of Table A and Article 38 of Table C in Schedule 1 to that Act and Schedule 14 to that Act.'").
236 Schedule 4, page 131, line 20, column 3, after ("43") insert ("in subsection (2)").
237 Schedule 4, page 131, line 21, column 3, at end insert ("in subsection (3)(d) the words from "or delivered" to the end.").
238 Schedule 4, page 131, line 23, column 3, after ("words") insert (" "or filed" and").
239 Schedule 4, page 131, line 29, column 3, leave out ("18 and 19") and insert ("18, 19, 124, 125 and 200").
240 Schedule 4, page 131, line 39, at end insert—
("( ) The repeal by this Act of part of section 174(1) of the 1948 Act shall have effect subject to the saving in section (Amendment of section 174 of the 1948 Act) (8) of this Act.").
241 Schedule 4, page 131, line 40, leave out ("in part") and insert ("(b)").
242 Schedule 4, page 131, line 44, at end insert—
("( ) The repeal by this Act of section 27 of the 1976 Act shall have effect subject to the saving in section (Repeals, transitional provisions and saving) of this Act.").
Lord Lyell: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 235 to 242 en bloc. All these are consequential on amendments which have been spoken to by my noble and learned friend, by my noble friend the Minister or, in the case of four of the amendments, by myself. I beg to move.
Moved, That this House doth agree with the Commons in the said amendments.—(Lord Lyell.)
On Question, Motion agreed to.

London Transport (No. 2) Bill
Returned from the Commons with the amendments agreed to.
Cumbria Bill [H.L.]
Message from the Commons that they concur with the Resolutions of this House communicated to the Commons in the Messages of 27th July and 22nd October.
Trustee Savings Banks Bill [H.L.]
Returned from the Commons agreed to.
Education Bill
Returned from the Commons with the amendments agreed to.