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Mr. Mitchell: I do not believe in professional self-regulation. Chaps regulating chaps is almost a British myth. The Institute of Chartered Accountants in England and Wales is a puny body when compared with the enormous power of the big five accountancy houses, whose fees run into a total of £4.5 billion a year. These are enormous concentrations of power. A small professional body cannot effectively regulate them, and so-called independent regulation, which we are proposing, will not regulate them properly either.
I shall move on to new clause 7, despite the interruptions from vested interests on the Opposition Benches. The Bill introduces some highly desirable changes, but accountancy houses enjoy a state guaranteed monopoly on insolvency and auditing. It is therefore right to regulate. I am glad that my hon. Friend the Minister gave the commitment that legislation will include a requirement for financial disclosure equivalent to that which is required of companies. The new clause deals with the disclosure of emoluments. The Minister told us--it is in the Bill--that limited liability partnerships will provide information in the notes to accounts about the aggregate amounts withdrawn or applied on behalf of members during the financial year. There is also the requirement to disclose the earnings of the highest paid member in cases where profit exceeds £200,000.
The figure of £200,000 comes from schedule 6 to the Companies Act 1985. That Act requires that information that is published should include emoluments, gains made by directors on the sale of share options and amounts paid to directors under long-tem incentive schemes. I hope that the Minister will tell us that the same categories will be covered in the requirements on limited liability partnerships, and that his estimate of £200,000 is based on the categories to which I have referred. Will LLPs be required to publish these details?
We all know that there is considerable disquiet about fat cats. The public need to know how much they are being paid. It is possible for limited liability partnerships to own limited companies. We would therefore have the ludicrous situation in which the limited company would have greater obligations to disclosure than the LLP parent of that company, which is exempt from much of that disclosure. That seems to be wrong.
I know that Opposition Members are not keen on disclosure of public information, but it is the public's right to know, especially when incomes have been accrued in pursuance of a publicly granted state-conferred monopoly in audit and insolvency.
New clause 8 is about more disclosure of the assets of each partner. Concessions are conferred on accountancy and other firms that are trading as LLPs. In the event of insolvency, the creditors can call on the assets of an LLP, which as I have said will not be substantial. It is more the assets of the negligent partner that are important. I return to the point which I broached earlier, which is how the public know which partner is responsible for the negligence. Who is the negligent partner against whom actions must be pursued? Knowledge of that might dissuade some clients from having dealings with that partner.
Customers should have access to that information. If existing claims against a partner are such that a further claim would take all his assets, the public need to know. How will they learn who is the negligent partner and whether other allegations of negligence have been made against individual partners of a limited liability partnership? People need to know who they are dealing with and what their status is.
We are talking about public provision of information to safeguard creditors, including information about individual partners' assets, against which claims can be made. We are limiting liability, so we need to know what the assets are. In the case of a company, shareholders' liability is limited to the extent of the paid-up shares, and the balance sheet lists the assets and liabilities for anyone to see; but the balance sheets published by LLPs will not give the creditors full and fair information. All I want is parity between the information published by LLPs and by limited companies. That seems fair.
Mr. Fabricant: The hon. Member for Great Grimsby (Mr. Mitchell) delivered quite a rant and proved his inability to count: I intervened twice, not three times. Some of his arguments, if not persuasive, raise interesting questions that the Minister should address.
It is a good idea in principle for the liability of large partnerships to be limited. In this modern age, partnerships can comprise 50, 100 or even 200 or 300 people--and in some instances, several thousand--and it is not practical to expect them all to have joint and several liability, but I tend to agree with the hon. Gentleman that, if the state is providing some protection, it should demand a quid pro quo and expect certain information from the partnership.
I do not go as far as the hon. Gentleman. Judging from their faces, not many Government Members would go that far. It is interesting to note the divisions on the Government side. The Government feel--and I agree with them--that there should be some protection in the form of limited liability, possibly echoing some of the protections that are available to companies under the Companies Acts. Should not limited liability partnerships also have to meet some of the obligations of disclosure in annual returns that are imposed on companies under the
Mr. Jim Cousins (Newcastle upon Tyne, Central): I share much of the frustration and irritation expressed by my hon. Friend the Member for Great Grimsby (Mr. Mitchell) at the circumstances in which we find ourselves. Apparently, the Bill is technical and rather obscure--of interest only to a few people who have a particular interest in some obscure points of law and commercial practice. Yet it advances an important innovation in British commercial law, which could well be taken up by many presently unlimited liability partnerships.
The hon. Member for Lichfield (Mr. Fabricant) said that the Bill was targeted at the needs of large partnerships. He and the Government must recognise that a number of partnerships that are not large may seek the protection and advantage of limitation of liability. That ought to give the House cause for a little caution.
We find ourselves discussing this quite complex Bill, which advances an important new principle, between the excitement of a statement on the Post Office, which is important, and the even greater excitement of debate on the Fur Farming (Prohibition) Bill. That is not the ideal circumstance in which to be discussing such a matter. It inevitably imposes a good deal of pressure--I do not suggest in any way that it is external pressure--on those taking part in the debate.
Mr. Fabricant: Of course the hon. Gentleman is right that small as well as large partnerships may seek the protection that the Bill will offer when enacted. However, given that there is similar legislation in other parts of the world, does he fear that jobs might be lost if larger partnerships centred outside the United Kingdom, in countries that offer partners protection?
The hon. Gentleman asked my hon. Friend the Member for Great Grimsby whether, in principle, he accepted the idea of limitation of liability in partnerships. Were I to be asked that question, my answer would be yes; I have no difficulty with the limitation of liability in partnerships.
The Partnership Act 1890 has always been considered one of the most ideal pieces of legislation. It has endured for more than a century without any tampering with or amending of its essential form or principles. It has stood the test of time; it has the clear concept of joint and several liability.
However, the Act was framed when all partnerships were extremely small, the people were individually known to each other, and the reputation, efficiency and performance of the partners could be measured and tested by potential and actual partners. Any problems could be addressed immediately, simply and directly. We have moved on: we now have partnerships that consist not merely of thousands of partners but sometimes of tens of thousands of partners, in which such disciplines cannot apply.
It may be right to offer the protection of limited liability to such partnerships, but--this point has already been discussed--the limitation of liability being offered here is not confined to such circumstances. Small partnerships can also take advantage of it. Therefore, we are considerably modifying the structure of the principle advanced in the 1890 legislation, and we should be properly cautious about that.
I am prepared to consider the principle of limitation of liability in partnerships, but we must consider whether this is the right moment to introduce such legislation. We still have the unfinished business of the Caparo judgment, to which my hon. Friend the Member for Great Grimsby rightly drew attention. Auditors appear to owe no significant legally meaningful duty of care to the shareholders in the enterprises that they serve.
Accountancy was done no favours by the Caparo judgment. It opened a hole in accountability and responsibility, which we are still puzzling how properly to fill. The present proposal to create an independent regulator for accountancy, but not a statutory one, in a way seeks to undo the damage that was done in the Caparo judgment.
One of my anxieties about the Bill is that until we can see the real strength of the framework being offered under independent regulation--the proposals that are now being worked up in front of us in the area of accountancy--it is difficult to know whether the Bill is appropriate and soundly formed. There must be a legitimate anxiety about that.
Furthermore, there have been a number of legal actions. Out of respect to my hon. Friend the Member for Middlesbrough (Mr. Bell), I shall not start a cascade of prominent names and cause him some agitation lest important people in our commercial world be denounced. However, my hon. Friend must recognise that those people are suing each other. Such matters may all be settled out of court. One would not attempt to speculate about that, but it is entirely possible. However, if matters do come to court, the rehearsal of the evidence will provide some important information which can guide us in legislatures and help us deal with some of the issues that arise in partnerships if we begin to limit liability.