§ Mr. Wrigglesworthasked the Secretary of State for Trade if he will make a statement about his plans for implementing the EEC Second Directive on company law.
§ Mr. DellThe EEC Second Directive on company law, adopted in December 1976, regulates the formation of public companies and the subscription and alteration of their capital. My Department has prepared an explanatory and consultative note, which is available from today, about changes that will be necessary to our company law in order to implement the directive. I have placed copies in the Library.
The directive requires public companies to adopt a designation which is different from that of private companies, to have a substantial minimum capital, and to be subject to a number of other detailed requirements about the manner in which the capital is to be subscribed, the payment of dividends and the increase of capital. In order to give effect to the directive, it will be necessary for the 386W present definitions of private and public companies to be changed, and make further amendments to our law, in order to take account of the new and more stringent requirements relating to public companies. These changes are set out in the explanatory note I have referred to.
I have decided that public companies, rather than private companies, will be required to adopt a new designation. This will ensure that no administrative costs will be incurred by private companies as a result of implementing the directive, and will make easier the task of ensuring that only those companies which meet the requirements of the directive trade as public companies.
It is proposed that the minimum capital for public companies should be set at £50,000. There will be provisions covering those companies which are at present public companies but which do not meet this requirement for subscribed capital, and new rules governing the conversion of a private to a public company and vice versa.
It is intended to introduce legislation during the 1977–78 Session in order to meet our obligation to implement the directive by December 1978.
§ Mr. Wrigglesworthasked the Secretary of State for Trade if he will make a statement about his plans for companies legislation.
§ Mr. DellI am preparing legislative proposals to make insider trading in securities a criminal offence and to remedy weaknesses in the law which have been demonstrated by recent company investigations, notably in connection with loans to directors and the private interests of directors. My Department is publishing a consultative document concerning legislation to implement the EEC Second Directive on company law, about which I am answering a separate Question today.
I am also publishing today a Green Paper on the future of company reports. This makes proposals to introduce new reporting requirements for larger companies, including a value added statement, an employment statement, and an international trade statement. In addition, more detailed disaggregation of the activities of companies by type of business and by geographical area is proposed, and the financial accounts are to be made 387W more comprehensive by requiring statements covering source and application of funds short-term borrowings, leasing arrangements, obligations to pension funds and more details of transactions in foreign currencies.