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Session 2005 - 06 Publications on the internet Standing Committee Debates Company Law Reform Bill [Lords] |
Company Law Reform Bill [Lords] |
The Committee consisted of the following Members:Mark Egan, Mark Oxborough,
Committee Clerks † attended
the Committee Standing Committee DTuesday 20 June 2006(Morning)[Mr. Eric Illsley in the Chair]Company Law Reform Bill [Lords]Motion
made, and Question proposed [15
June], That— (1)
during proceedings on the Company Law Reform Bill [Lords] the
Standing Committee shall (in addition to its first meeting at 9.00 a.m.
on Thursday 15th June)
meet— (a) at
1.00 p.m. on Thursday 15th
June; (b) at 10.30 a.m.
and 4.30 p.m. on Tuesday 20th
June; (c) at 9.00 a.m.
and 1.00 p.m. on Thursday 22nd
June; (d) at 10.30 a.m.
and 4.30 p.m. on Tuesday 27th
June; (e) at 9.00 a.m.
and 1.00 p.m. on Thursday 29th June;
(f) at 10.30 a.m. and 4.30 p.m.
on Tuesday 4th
July; (g) at 9.00 a.m.
and 1.00 p.m. on Thursday 6th
July; (h) at 10.30 a.m.
and 4.30 p.m. on Tuesday 11th
July; (i) at 9.00 a.m.
and 1.00 p.m. on Thursday 13th
July; (2) the
proceedings shall be taken in the following order: Clauses 1 to 137;
Clauses 253 to 361; Clauses 604 to 641; Clauses 676 to 680; Clauses 694
to 777; Schedule 4; Clauses 778 to 795; Schedules 5 to 7; Clauses 796
to 806; Schedule 8; Clauses 807 to 812; Clauses 821 to 846; Schedule
10; Clauses 847 to 849; Schedule 11; Clauses 850 to 871; Schedule 12;
Clauses 872 to 881; Schedule 13; Clauses 882 to 893; Schedule 14;
Clauses 894 to 901; Schedule 15; Clauses 902 to 919; Clauses 921 to
925; Clauses 139 to 238; Schedule 1; Clauses 239 to 252; Clauses 362 to
529; Clauses 642 to 648; Schedule 2; Clauses 649 to 675; Schedule 3;
Clauses 530 to 603; Clauses 681 to 693; Clause 138; new Clauses; new
Schedules; Clauses 813 and 814; Schedule 9; Clauses 815 to 820; Clause
920; Schedule 16; remaining proceedings on the
Bill; (3)
the proceedings shall (so far as not previously concluded) be brought
to a conclusion at 5.00 p.m. on Thursday 13th
July.—[Margaret
Hodge.] 10.1
am Question
again
proposed.
The
Chairman: We begin this morning by resuming the debate on
the Government’s second programme motion. Debate may last for no
more than the seven minutes remaining of the 30. I call the hon. Member
for Solihull (Lorely Burt) to resume her
speech.
Mr.
Crispin Blunt (Reigate) (Con): On a point of order, Mr.
Illsley. Happily, the opportunity afforded to us by the break in the
debate allowed me to consult “Erskine May” and pick up a
point that I should have picked up when we began to discuss the second
motion in the Programming
Sub-Committee. The
motion is so substantially the same as that rejected by the Committee
last week that it is my contention that it is out of order. Page 388 of
“Erskine May”, which refers to matters that have already
been decided during the same Session,
says: “Whether
the second motion is substantially the same as the first is finally a
matter for the judgment of the Chair.”
If we are considering a motion that is
substantially the same as the first, I would contend that altering the
time-out for the Committee by only one hour, as is self-evidently the
case, means that this motion has already been substantially decided on
by the Committee. The
point of substance here is that the Opposition are anxious that the
Government and their draftsmen should have enough time to come forward
with their amendments on the consolidation effect. We see the summer
recess as an opportunity for that and we would like the out-date to be
not 13 July, but 19
October. That is the
substantive point, but the technical and procedural one is
self-evident—this is substantially the same motion. It has
already been rejected by the Committee and cannot be put to us
again.
The
Chairman: I have listened to the hon. Gentleman’s
point and, obviously, taken advice on the issue in the short time that
I had available this morning. Given that we are now some 23 minutes
into the 30-minute allocation of time for the programme motion and that
the Programming Sub-Committee has already agreed that
motion—albeit with some reservations on the part of the
Opposition—I am not prepared to reverse the decision that I made
to consider the programme
motion. In my view,
this is not a procedural issue as such. It is a matter for debate as to
whether the programme motion has substantially altered. I have made the
ruling and will stick with it. We will continue with the motion as it
stands. On the
substantive point of extending the out-date, we rehearsed that last
Thursday in the Programming Sub-Committee and in the opening debate.
Obviously, there may well be a further meeting of the Programming
Sub-Committee, when the hon. Gentleman will again have the opportunity
to press for further time for the Bill. At the moment, that is still in
the hands of the usual channels. I hope that deals with his
point.
Lorely
Burt (Solihull) (LD): I am heartened by your words, Mr.
Illsley, regarding the possible flexibility on further time. As I was
saying in the previous sitting, we are disappointed, particularly in
view of the fact that the Bill has been seven years in gestation, and
four more days to get the consolidation right would have been helpful,
not least for the civil servants, who need the
time.
The
Minister for Industry and the Regions (Margaret Hodge):
This morning, we are anxious to proceed with the meat of the clauses
that we must consider, and we in the Government are keen to reach
agreement with other parties represented in Committee. If we can, we
will have further discussions about additional time. If we can reach an
understanding, we will return to the Committee with a fresh programme
motion. It is probably best if we reach such an outstanding outside the
Committee and get on with the Bill today.
Lorely
Burt: I am grateful to the Minister for those words. She
began by saying that we will be considering the Bill in a spirit of
conciliation, so I hope that we can achieve that. Without further ado,
I shall sit down and let us get on with our
consideration. Question
put:— The
Committee divided: Ayes 10, Noes
8. [Division
No.
2] AYESNOESQuestion
accordingly agreed to.
Clauses 1 to 7 ordered to
stand part of the Bill.
Clause 8Memorandum
of
association Question
proposed, That the clause stand part ofthe
Bill.
Mr.
Jonathan Djanogly (Huntingdon) (Con): Following a somewhat
unsatisfactory set of preliminaries, in which I sat in awe at the
dexterity and skill of my hon. Friend the Member for Reigate (Mr.
Blunt), we move on. I
welcome you to the Chair, Mr. Illsley, and look forward to receiving
your help over the coming weeks, as well as that of Mr. Bercow. I want
to make a few brief preliminary remarks, starting by declaring my
interests as they appear in the
register. We welcome
the Minister to her first Department of Trade and Industry Bill in her
new role and look forward to working with her and other members of the
Committee in the spirit of co-operation that she expressed last
Thursday on behalf of the Government.
For the largest Bill
on record, we have assembled a crack team of my hon. Friends, boasting
no fewer than four lawyers, of whom three have corporate experience; a
corporate accountant; and a colleague with good experience as a company
director. Their experience will, I am sure, greatly help our
deliberations. We have put on record our concerns and noted the lack of
understanding in relation to the programme motion, but short as time
may therefore be, I am sure that we shall all end up somewhat the wiser
at the end of the process.
The issues in the Bill are many.
Perhaps they are mainly technical, but they are certainly important in
establishing and improving the framework in which British companies can
operate in a secure, efficient, low regulatory and competitive
environment. So the journey begins, and I address first the question,
which is clause 8 stand part.
The clause in effect replaces
section 2 of the Companies Act 1985 and deals with the memorandum of
association. That document, of course, deals with the company’s
relationship with the outside world, as opposed to the articles of
association, which regulate the relationship between the company, its
members and its officers. The clause retains the requirement that
individuals who wish to form a company must subscribe their names to
the memorandum of association.
The memorandum now serves a more
limited purpose and evidences the intention of the subscribers to the
memorandum to form a company and to become members of that company on
formation. In the case of a company that is to be limited by shares,
the memorandum will also provide evidence of the members’
agreement to take at least one share each in the
company. In Grand
Committee in the Lords, addressing a different amendment, Lord
Sainsbury explained how that came
about: “It may
be worth setting out what the memorandum of a company will be under the
Bill. The Company Law Review looked very carefully at the question of
the company’s constitution. It was keen to see the
company’s internal rules as far as possible set out logically in
one place and pointed out the potential for overlap under current
arrangements between a company’s memorandum and its
articles. In taking
forward those valuable suggestions, we wanted to do away with any scope
for confusion between the memorandum and the articles, and introduce a
clear distinction between the information in the memorandum, which will
be in effect an historical snapshot, which, once provided, has no
continuing relevance, and the constitution of the company
properly-so-called, as contained essentially in its articles, which
will be of real significance in the company’s
life.”—[Official Report, House of Lords, 30
January 2006; Vol. 678, c.
GC3-4.] We agree with
all that. The importance of the memorandum in the context of setting
out a company’s relationship with outside parties and the once
hallowed ultra vires implications have in practice been somewhat
whittled down over the years by a mixture of precedent and statute. In
reality, the wide use of non-specific object clauses means that
confusion was setting in with the mainly older and specialist companies
that retain specific objects. However, the Bill represents a halfway
house. We say that the
mere formality of noting a corporation is fine, but ask why it needs a
different document. That was partially addressed on Report in the Lords
by Government amendment No. 3, which merged clause 9(4)(a)(i) and (ii)
and reduced two filing documents to one. But why do we need a
memorandum at all? Let us simply get rid of it and insert the
information required by clause 8 in the first articles of association,
which will always need to be filed at the same time in any event. That
would bring further simplicity and be in the deregulatory spirit of the
Bill. I tabled an
amendment to that effect—perhaps the poor drafting meant it
could not be accepted—but notwithstanding that and accepting the
fact that it was not accepted, I would be grateful to hear the
Minister’s views on the content of the
clause. 10.15
am David
Howarth (Cambridge) (LD): I welcome you, Mr. Illsley, to
the Chair of this important and
potentially long-running Committee, and I welcome the Minister to her
new post. This must be the most strenuous first Bill that a Minister
could have faced in a new job.
I echo the remarks of the hon.
Gentleman, who said that the Bill not only clarifies many issues of
company law, but is economically important. If such a Bill were to go
wrong, it might lose companies millions of pounds in litigation. That
is why I support what he said about clause 8.
The company law review has taken
a long time, and it has taken up vast amounts of effort—not
least the time of many of my erstwhile academic colleagues. Its purpose
is to simplify company law. It is surprising that something as obvious
as the difference between articles and memorandums of association has
not been abolished. Multiplying various documents does not seem to be
an obvious way to regulate company law. I therefore ask the Minister
why the Government still think it important to have a number of
separate documents on registration in respect of not only the clause,
but other clauses in this part of the Bill.
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