HL Deb 17 July 1984 vol 454 cc1390-4

6.31 p.m.

Lord Lucas of Chilworth rose to move, That the draft order laid before the House on 25th June be approved.

The noble Lord said: My Lords, since 1948 there have been four major Companies Acts—in 1967, 1976, 1980 and 1981—which have introduced into company law new and radical concepts. Inevitably, such a body of law contains a number of anomalies, anachronisms and inconsistencies. The distinguished retired parliamentary draftsman working on these Acts came to the view that a satisfactory consolidation could not be affected within the normal consolidation procedures.

The orthodox solution to this problem would have been a programme Bill to make the necessary pre-consolidation paving amendments. However, this alternative, because of the pressure on legislative time, would have delayed the introduction of the consolidation probably for a number of years. This was not considered acceptable because the Government had accepted the urgent need to consolidate. This was keenly felt by practitioners and those concerned with company law. Therefore, the Companies Act of 1981 provided that amendments could be made by order, and we are now considering the second order made under this procedure.

This draft order is a very small part of the preliminaries to the consolidation of the Acts. It has been considered by the Joint Committee on Statutory Instruments, which made no comment. The purpose of the order is to make further amendments to the Companies Acts in addition to those already made in the first Pre-Consolidation Amendments Order earlier this year.

The amendments made in this and in the earlier order are desirable to enable a satisfactory consolidation to be produced. The power to make the amendments derives from Section 116 of the 1981 Act and it can be exercised only on the basis of recommendations of the Law Commission and the Scottish Law Commission acting jointly.

As with the previous order, a report by the two Law Commissions in Command Paper 9272, making joint recommendations, was presented to Parliament last month when the draft order was laid. The report explains the need for and the effect of each amendment. If the order is made, the amendments will come into force only with the Consolidation Acts and the Section 116 power will then lapse.

As my honourable friend the Minister of State for Industry explained in another place, we have had to defer introducing the legislation to consolidate the Companies Acts until next session. The complexity and subtelty of the subject matter is unusual, and in view of what I have said about the scale of the project, it has taken longer to prepare the legislation than we had hoped.

However, we have sought to put this extra time to good use. Continuing work on the legislation and further research on some of the points which emerged when the previous order was under consideration have brought to light several points which might usefully be resolved by the present procedure. The necessary amendments are contained in the present draft order. These proposed improvements to the legislation can be put forward now because of the willingness of the two Law Commissions to deal with the points in time to meet the constraints of the parliamentary timetable. I should at this stage like to thank them very warmly for all their work.

My Lords, I commend the draft order and beg to move the Motion standing in my name.

Moved, That the draft order laid before the House on 25th June be approved.—(Lord Lucas of Chilworth.)

Lord Bruce of Donington

My Lords, I should like to thank the noble Lord for having presented the order with the lucidity and clarity to which we have become accustomed. We on this side of the House see no reason why these orders should not be made. As the noble Lord has said, they cover four different Companies Acts, all of which are due for consolidation in due course.

One of the Acts concerns Scotland, and, being a Scot by descent myself, I am happy to report to the House that the noble Lord, Lord Ross of Marnock, has been kind enough to delegate to me the overseeing of this part of the order which relates to Scotland.

As I have already said, the orders are quite unexceptionable and there is no reason why I should detain the House further upon them. There is, however, just one query of which I gave the noble Lord notice earlier on today. It concerns the consolidation process itself. We are given to understand that following the Cork Report we are due to have a Bill presented to us some time before Christmas which substantially amends the law of insolvency, which, as your Lordships are aware, is very largely enshrined in the Companies Act of 1948.

What I should like to know from the noble Lord, if he is in a position to inform me, is whether the whole process of consolidation has taken into account the fact that any Act to amend the insolvency law is likely to make further quite large-scale amendments to the Companies Act 1948. Perhaps the noble Lord can give us some information on that point, because it is in the interests of the legal and accountancy professions, as well as of the companies themselves, to know just how this programme is going forward. It is a matter of very considerable interest.

The noble Lord said he had received a fair wind from the Law Society and various other organisations concerned with the law. I just wonder whether he has had any communication at all from the CCAB, the Consultative Committee of Accountancy Bodies, as to whether they had given it a fair wind as well. I assume that they have, since I, in common with other noble Lords, have had no representations from them. Aside from those observations, I am very pleased to give the order a fair wind.

Lord Lloyd of Kilgerran

My Lords, the noble Lord the Minister has summarised the contents and purpose of this order in his usual concise and efficient way and I would like to join in thanking him for once again fulfilling his task so well before us.

The contents of the order have some significance to many businesses, business firms, accountants and lawyers. I, of course, would not presume to make any comments at all on those items which deal with Scottish law, though I had hoped that the noble Lord, Lord Bruce of Donington might be able to explain the social significance arising from Paragraphs 2 and 3, where there is now an amendment of the Criminal Procedure (Scotland) Act to enable the courts not only to put people into prison but also to fine them.

I was also interested in Paragraph 6 which has clarified some points, including one perhaps of not great importance but which has caused a little trouble to practitioners: that is, the meaning of the word "transaction" in the Companies Act. Now in Paragraph 6 it says that it is associating the word "transaction" with "or arrangement"; and that will clarify the position to some extent.

However, I was a little unhappy about the observations of the noble Lord the Minister regarding the progress being made for the consolidation of the Companies Acts. As he said, we have four major Acts and we will soon have two orders. Your Lordships have heard on many occasions about the desirability of consolidating the Companies Acts as soon as possible. It is not quite clear to me when the Minister anticipated that this work would be completed. He said, "perhaps in the next Session", but I am not clear what that means in the way of time.

As I have said before in your Lordships' House, it is very difficult for industry and their advisers to follow the many Acts that exist in their present form, and thus to give adequate advice. I hope that the Government will still press on very seriously with producing a consolidated Act in as convenient a form as possible and as cheaply as possible. My Lords, I support this order.

Lord Renton

My Lords, I, too, should like to support this order. I am sure that all those who would like to see an improvement in the statute book must welcome the method which has been used again on this occasion. The importance of progress in consolidation cannot be under-estimated and I am sure that most of us would like to see even more of it, although there has been improved progress in recent years. But the very strict statutory requirements affecting consolidation have undoubtedly been a hindrance to progress. They have caused delay sometimes because of the sheer complexity of trying to consolidate a mass of previous legislation which may be conflicting, and to do so while still adhering to the statutory requirements.

Of course, the method used on this occasion enables mistakes to be rectified. It should I think be used very freely in order to delete provisions which, even in a relatively short space of years, may seem to have become obsolete or redundant as well as conflicting with more important provisions. So this order, as an example of the method, is to be welcomed; but I should like to see the method extended.

I hope it is not irrelevant for me to mention that the Statute Law Society, of which I have the honour to be president and of which the late the right honourable Sir George Baker was chairman (and we deeply regret his passing) recently had a working party on consoli- dation of which he was a member, which recommended that the pace of consolidation should be and could be increased by the greater use of methods of this kind. I hope before long to have copies of this report to send to those members of the Government who are interested, and perhaps to others too.

Turning briefly to the amendments that are proposed here, they are technical and limited; they are not likely to arouse controversy. But I should like, in particular, to point to paragraphs 2 and 3, which, for Scotland, appear to correct what can only have been regarded as a mistake in the previous legislation, the 1975 legislation. That is a plain example of what I was saying just now and of the desirability of it.

The fact that sometimes these matters will be technical and understood only by experts like the noble Lord, Lord Lloyd of Kilgerran, should not alarm those of us who are not so expert but who are responsible for legislation, because really this is a matter in which the relatively few people who have the experience, the training and, I may add, the intellect to deal with these matters, must be allowed a certain amount of freedom. I would say that, for example, the amendments set out in paragraph 8 are of that kind. It is, for example, the accountancy bodies to which the noble Lord, Lord Bruce, so properly referred, which have the experience and which have discovered the defects which can arise and which should be cured in the process of consolidation, rather than perhaps waiting for many years for a fresh major Bill.

Lord Lucas of Chilworth

My Lords, may I thank the noble Lord, Lord Bruce of Donington, the noble Lord, Lord Lloyd of Kilgerran, and my noble friend Lord Renton for their welcome to this measure. May I also thank them for their response and for their very useful comments.

Perhaps I might just say, in response to my noble friend's remarks, that I do not know how he was able to exclude himself from the learning which he applied to the noble Lords, Lord Bruce of Donington and Lord Lloyd of Kilgerran, because it is I who have the alarm. Neither he nor other noble Lords who are engaged in this profession have any alarm at all, of course. But I am very much encouraged by what my noble friend said in his welcome for this procedure. There is no doubt that all those concerned will be watching how this procedure is used and what its effect will be.

There may very well be, as I think the noble Lord, Lord Lloyd, said, some disappointments that consolidation has been delayed for so long. However, it was fairly considerable and I have to say that when the Consolidation Bill is presented to Parliament, I fear it is going to be some 600 pages long with 700 or so clauses in it. That I think explains some of the complexity.

The noble Lord, Lord Lloyd, also asked about the timetable on this. We plan to introduce the Bill at the earliest possible opportunity in the next Session, and it is intended that it shall be done in sufficient time for it to come into force no later than 1st July 1985.

The noble Lord, Lord Bruce, asked two specific questions, and he gave me notice of one of them for which I am most grateful to him. He asked in particular how the Cork Committee, the insolvency law review, was going to be handled. As he will know, there are a number of proposals currently under discussion, with some implications for the consolidation legislation: the Gower report, the European Community's Seventh Directive on group accounts and the Third Directive on mergers of public companies. In particular, so far as the Cork Committee's report is concerned, a White Paper was issued in February, as he will recall. The proposals contained in it will be enacted in separate legislation which, subject to the pressures of other parliamentary business, the Governmment intend to introduce in the next Session of Parliament. So they will form a separate piece of legislation. Therefore, dependent upon whether the main Bill has to be amended before it comes to Parliament, to take care of what would appear to be a shorter piece of legislation dealing with the Cork Report—

Lord Bruce of Donington

My Lords, I want to be quite sure that I have understood the noble Lord correctly. As I understand it, legislation on insolvency will be introduced first. On the assumption that it proves sufficiently non-controversial not to cause the party managers any difficulty, it ought to be available some time before Christmas. The question that I have to ask the noble Lord is: will that then be consolidated along with the rest or will it rest on its own feet?

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord for making his question quite clear to me. It will rest upon its own feet, but I could not possibly commit my right honourable friends in another place as to whether it will appear before Christmas. Certainly, it will be early in the Session. The noble Lord asked me about consultation. As your Lordships will probably recall, there was quite extensive consultation prior to the first report of the two Law Commissions which led to the first pre-consolidation amendment order earlier in the year. As I indicated in my opening remarks, the circumstances surrounding the second report and this order are different. The two Law Commissions have had to act most expeditiously to produce the report in the time available and there was simply not time to undertake the normal type of consultation that we conducted previously. However, we have no reason to think that there is any disagreement with the proposals contained in the order.

I think that that answers all the noble Lords' questions. I am quite sure that this order will pave the way for a better consolidation—a development to be welcomed by all those concerned with company law. I am most grateful to noble Lords for their support.

On Question, Motion agreed to.