Companies (Audit, Investigations and Community Enterprise) Bill [H.L.] (Hansard, 14 July 2004)

§ Lord Grocott:
My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Companies (Audit, Investigations and Community Enterprise) Bill, have consented to place their Prerogative and Interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

The noble Lord
said: My Lords, it is quite clear what I am after in Amendments Nos. 1 and 2. We have debated the topic. I did not move the equivalent amendment on Report for various reasons, which those of us who attended the debate will understand. However, I would like some reassurance on the matter from the Minister. I have written to him; he knows what I am looking for. I beg to move.

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville):
My Lords, I had an interesting discussion with the noble Lord a few weeks ago about the issues underlying the amendments, and he has since written to me about them. He made the point that, where the regulator uses his powers to appoint a director or a manager to a CIC, it would be helpful if the regulator could obtain the consent of the CIC's existing directors to his action. That would reduce the risk of the regulator acting in a heavy-handed way, and of the appointment leading to tensions within the management team.
We would all agree that it would be desirable to get the consent of the CIC's directors to an appointment, and that the regulator should aim to do it where possible. However, it will not always be realistic to expect to obtain the board's agreement. As the noble Lord and I have discussed, an appointment under either of the powers will be made only where the CIC in question is in breach of at least one of the default conditions set out in Clause 39, and the regulator thinks that the power must be exercised to maintain confidence in CICs. The situation will therefore be quite serious. 1295 In such a position, we would of course expect the regulator to be in dialogue with the CIC concerned. He will surely need to talk to the directors of the CIC to find out what is going on, and what needs to be done to fix it. If he has not done so, he will not be able to provide good reasons for taking action, and will, quite rightly, be challenged. But there can be no certainty that the board of the CIC will co-operate with him, let alone that it will agree with the regulator's decision. For instance, the regulator may decide to appoint a director or a manager to a CIC because he considers that the existing directors are not capable without assistance of remedying the problem. In some cases, one can easily imagine that the existing directors might not agree. In other cases, the board might be so split that no agreement was possible.
I know that the noble Lord, Lord Glentoran, appreciates those points. I expect that is why his amendments require the regulator to, take all reasonable steps to ensure the consent of the board, rather than to require their consent in all cases. However, I do not think that this additional measure is necessary. That is because the regulator is already required by the general principles of administrative law not to behave unreasonably. He is also subject to the specific constraints in the Bill, to act in accordance with good regulatory practice and to use his supervisory powers only where necessary. This means that where the regulator acted improperly or unreasonably in making an appointment, he would be subject to challenge.
If the appointment of a manager or director by the regulator is unnecessary, or inappropriate, the regulator would be in breach of his duty in Clause 39 to use his powers only to the extent necessary; and the CIC would be able to appeal to the appeal officer. The Government brought forward amendments at Report stage to require the regulator to give reasons for his decisions and to allow the appeal officer to consider appeals on matters of law as well as fact.
Overall, the Bill together with existing administrative law already place significant constraints on the way in which the regulator may use his power. As I have said in previous debates, our aim is that the regulator should have a light but proportionate touch and we think that the current provisions of the Bill achieve that. I hope that in the light of that explanation the noble Lord, Lord Glentoran, will be reassured and will feel able to withdraw the amendment.

§ Lord Glentoran:
My Lords, I thank the Minister for that statement. I do, indeed, feel reassured and, as this is where we wind up, I should say that for my part, in Part 2 of the Bill, we started with almost a sketch and have finished with a Bill that will achieve what the Government desire and will be comprehensible, usable and welcome. I offer my thanks to the Bill team and to the Minister for their courtesy. I hope that CICs become a success. I beg leave to withdraw the amendment.

§ Lord Sainsbury of Turville:
My Lords, I beg to move that this Bill do now pass.
This is an important and highly technical Bill and I am grateful to noble Lords on all sides of the House for taking part in the debates. The Government have listened carefully to all the points made. By my reckoning, nearly half of the government amendments tabled on Report were wholly or partly in response to points raised by noble Lords in Grand Committee. I believe, therefore, that we can all take satisfaction in having scrutinised and improved the Bill before sending it to the other House.
Perhaps I may also take this opportunity to thank the Bill team who have done a magnificent job, both in maintaining the clear purposes of the Bill, while at the same time being flexible in responding to thoughtful criticisms of practical details.
Moved, That the Bill do now pass.—(Lord Sainsbury of Turville.)

§ Lord Hodgson of Astley Abbotts:
My Lords, this has been an odd Bill in the sense that we have had the cart before the horse—the horse being the company law review for the first part and the Charities Bill for the second. It has not been a particularly party political Bill because there has been fairly broad strategic agreement about what we were seeking to achieve, but there were, nevertheless, several lacunae or weaknesses that we were able to address in Committee—in particular, the regulatory burden.
It is good that the Government have listened and I should like to place on record our thanks to the noble Lords, Lord Sainsbury and Lord Evans, who arranged the meetings at which we were able to examine the issues that concerned us and to explain how we felt that they could best be remedied. As a result I am happy to agree with the Minister that we have improved the Bill significantly during its passage through the House.
Perhaps I may add my thanks from these Benches to Keith Masson and the Bill team. I know that at an earlier part of the proceedings I said that he had drafted a wonderful chart of the new FRC structure. He subsequently told me that it was not him, but someone else in the Bill team who was responsible and I am happy to place on record my thanks to whoever it was who drafted that particular part of the Bill it was very helpful, given the dense nature of the first section.
We also offer thanks for the external help and advice we had from the Law Society, the Institute of Chartered Accountants in England and Wales, Ashursts and from George Bompas QC, who was helpful on various aspects of extraterritoriality and the investigative side. 1297 We on these Benches conclude by saying that good corporate governance and a strong charitable sector are clearly important parts of our society. In so far as the Bill encourages both of those, we wish it well.

§ Lord Sharman:
My Lords, I echo the sentiments of the noble Lord, Lord Hodgson. The Bill is now improved and significantly workable. I am particularly pleased that the Government listened and took a great deal of action on Clause 9, which was causing some considerable difficulties on this side of the House. I should also add my thanks to the Bill team. I should not admit that it was the first time that I understood the regulatory regime of accountants. So, thank you very much for that. The team has done an excellent job and we now have a Bill that is workable and will be of great benefit. Thank you.