COMMONS AMENDMENT (Hansard, 7 November 1989)

§ Lord Trefgarne
My Lords, I beg to move that the House do agree with the Commons Amendment No. 5. I apologise that I am not Lord Strathclyde who is so widely acclaimed, and rightly so when speaking from this Dispatch Box. Nevertheless I hope your Lordships will allow me to move this amendment. Removing the words "of the company" from Section 226(5) widens the application of that provision in a way which we believe would help ensure that the detailed accounting requirements of the Act are overridden in appropriate cases in the interests of accounts showing a true and fair view. It is therefore no more than a technical point and a clarification. I hope your Lordships will agree with it. I beg to move.

§ Lord Williams of Elvel
My Lords, I certainly do not regret that the noble Lord, Lord Trefgarne, is not the noble Lord, Lord Strathclyde. I think the two characters mesh very easily. We are very glad to see the noble Lord taking part for the first time in a Companies Bill. I am sure it will not be the last time because nowadays we have a Companies Bill more or less every Session.
Can the noble Lord very kindly explain, given that the expression "the special circumstances of the company" is to be left out and "special circumstances" put in instead, what sort of special circumstances the Government have in mind? Will these special circumstances be defined in any way? Will they not be defined in any way? Who is to say? Will it be for the court to say whether they are special circumstances? Can he illuminate the discussion a little more?

§ Lord Lloyd of Kilgerran
My Lords, can the Minister go a little further? In defining "special circumstances" is it proposed to have some regulations in relation to this matter?

§ Lord Trefgarne
My Lords, I am able to explain in more detail what is meant. I had hoped my earlier shorter observations would have been sufficient for your Lordships, but I am happy to go further.
New Section 226(5) gives primacy to the true and fair requirement in new Section 226(2). At present it states that if, in the special circumstances of the company, compliance with other detailed rules is inconsistent with the requirement to show a true and fair view, then the directors must depart from those rules to the extent necessary to give a true and fair view.
We have looked at this very carefully and have concluded that we should bring the wording into line with the corresponding provisions on group accounts by removing the restriction that the special circumstances must be those of the company. The effect is that where there are special circumstances 586 of a general nature—or indeed special circumstances which apply to a particular class of companies, and as a result accounts prepared strictly in accordance with the detailed rules in the Act do not show a true and fair view—then companies must depart from the detailed rules to ensure that a true and fair view is given.
I hope that clarifies the matter for the noble Lord and that he will now agree that the amendment should form part of the Bill.