Mr.
Djanogly: I agree with the Minister. On an ongoing basis,
it would be very onerous for most companies to have to refile their
articles every time they changed their share capital, although
manylarge companies do exactly that. However, I thought that
we were discussing the statement of initial shareholdings—the
shareholdings that the company is incorporated with—rather than
the position on an ongoing basis. I appreciate that there might have to
be a form on an ongoing basis, but that should not have to be the case
on day
one.
Margaret
Hodge: If the statement of initial shareholdings were
incorporated into the articles of association, which I think is what
the hon. Gentleman is talking about, it would become an integral part
of the articles of association, so any change to them would mean that
all the articles would have to be changed. We propose a separate
statement.
Mr.
Djanogly: The practice of most companies that put their
initial share capital into the articles is that the first time they
change them, they remove it at that point, so rather than being an
ongoing obligation, it would probably be a one-off when the company was
recapitalised for the first
time.
Margaret
Hodge: I think that that would of itself become extremely
bureaucratic and the statement of share capital could well be out of
date on day one after the company was incorporated. Having a separate
statement from the beginning is clearer. There may be variants of view
on that, but we believe that it will be simpler to update the statement
if it is separate, not least if the company chooses to use electronic
means to do so. I hope that, having had that little exchange, the hon.
Gentleman will withdraw the
amendment.
Mr.
Djanogly: I hear what the Minister says and this is not
the sort of provision that anyone should want to die in a ditch over.
On that basis, I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Clause
10 ordered to stand part of the Bill.
Clause
11Statement
of
guarantee
Margaret
Hodge: I beg to move amendment No. 75, in clause 11, page
5, line 30, leave out from ‘contain' to end of line 31 and
insert ‘such information as may be
prescribed for the purpose of identifying the subscribers to the
memorandum of
association'. The
amendment arises from a debate that took place on Report in another
place, when the Bill was amended to remove the requirement for
subscribers’ names and addresses and the statement of capital
and initial shareholdings. That requirement was replaced with a power
that would enable the Secretary of State, in regulations that can be
made under the Bill, to prescribe the types of information that are to
be provided in the statement of capital and initial shareholdings for
the purpose of identifying the subscribers to the memorandum of
companies to be formed with share capital. Consistent with that
approach taken to companies that are to have a share capital on
formation, the amendment carries forward the principle that the
Secretary of State should be able to specify what is required for the
purposes of identifying the subscribers, where it is proposed that a
company will be formed as a company limited by guarantee.
As we mentioned in the other
place, we envisage that the power will be used initially to continue to
require the names and addresses of the subscribers to be provided. Both
the Serious Fraud Office and the companies investigation branch have
confirmed to us that that information is useful in combating fraud, and
we see no reason not to retain it as a requirement for the time being.
The address, as now, does not need to be a residential address; a
contact address is sufficient. The power will provide flexibility for
the future if, for example, it is concluded that the requirement for
subscribers’ addresses is no longer necessary. The power could be
used to remove that requirement or to provide for an alternative or for
better information pertaining to a subscriber’s
identity. Mr.
Djanogly: The amendment seems to us to be well considered,
not least in the context of avoiding exposure to extremists, which we
shall discuss in much more detail later on, and it has our
support. Amendment
agreed to.
Clause 11, as amended,
ordered to stand part ofthe
Bill.
Clause
12Statement
of proposed
officers
Mr.
Djanogly: I beg to move amendment No. 4, in clause 12,
page 6, line 1, leave out from beginning to second
‘the’.
The
Chairman: With this it will be convenient to discuss the
following: Amendment
No. 47, in clause 12, page 6, line 1,leave
out ‘to be a public
company' and
insert ‘required or proposes to
have a company
secretary'. Government
amendments Nos. 76 to 79 and
93. Amendment No. 51,
in clause 44, page 18, line 34, leave
out ‘In the case of a public
company'. Amendment
No. 52, in clause 44, page 18, line 34, after ‘executed', insert
‘by a
company'. Amendment No.
53, in clause 44, page 18, line 36, at end
insert ‘who shall not be the same
person'. Government
amendments Nos. 94 to 96 and
100. Amendment No. 56,
in clause 48, page 20, line 5, after ‘director', insert
‘or
secretary'. Government
amendments Nos. 112 and
113 Government new
clause 14—Authorised
signatories. Government
new clause 15—Appointment of authorised
signatories. Government
new clause 16—Minimum age for appointment as authorised
signatory. Government
new clause 17—Register of authorised
signatories. Government
new clause 18—Particulars to be
registered. Government
new clause 19—Particulars to be registered: power to make
regulations. Government
new clause 20—Duty to notify registrar of
changes. Government
amendment No.
114
Mr.
Djanogly: It looks like the Government have something to
say on this clause as well, but I shall kick off. The clause replaces
section 10 of the 1985 Act. In
so far as it coincides with the question of authorised signatories, I
note that the Chairman has chosen also to include amendments to clause
44. There are two
basic regulatory changes to consider. First, as recommended by the CLR,
once the legislation is in force all directors will have the option of
having their home addresses kept on a separate record to which access
is restricted. To benefit from that option, a director will have to
provide a service address for the public record. We will discuss that
in detail under part 10.
10.45
am Secondly, as
recommended by the CLR, the Bill reflects the abolition of the
requirement for private companies to have a secretary. We will debate
that in further detail when we get to part 12. There is a consequential
issue concerning company secretaries—I repeat that this will be
debated in greater detail later—namely whether, if a private
company decides to have a non-statutory company secretary, it should
then have to notify particulars. Lord Sainsbury said emphatically in
the Lords Grand Committee that it should not. On Report in the Lords,
Lord Hodgson said:
‘“Our position on
this is simple—where a company chooses to have a secretary, that
secretary should be fully empowered to exercise all the functions and
bear all the responsibilities of a legally required
secretary.”—[Official Report, House of
Lords,9 May 2006; Vol. 681, c.
782.] I restate that as
our position today. As Lord Hodgson said on Third Reading:
“The lack of any
requirement for the registration of secretaries will leave those that
still exist in limbo, with no official recognition of their
status.”—[Official Report, House of Lords, 23 May
2006; Vol. 682, c. 710.] Lord
Sainsbury said that the only time third parties should need to know the
information about a secretary is when executing documents. Technically,
the Minister may have been right, although
practically—particularly for larger companies and for corporate
governance purposes—we do not think that he was. That will be
the debate on part
12. On Third Reading in
the Lords, Lord Sainsbury addressed the question of secretaries and
others signing documents in detail. He said that the Government would
consult on four issues. He stated:
“There are four questions
that need to be addressed with this group of amendments. First, who
should be able to execute documents for a company? Secondly, and
related to the first, if private companies appoint a secretary, should
that secretary be able to participate in the execution of documents for
the company? Thirdly, should the details of any secretary voluntarily
appointed by a private company be on the public record? Fourthly, and
finally, if private companies appoint a secretary, should the directors
be under an express duty, imposed by the Bill, to secure that the
secretary is a person who appears to them to have the requisite
knowledge and experience to discharge the functions of a
secretary?” —[Official Report, House of
Lords,23 May 2006; Vol. 682, c.
711.] Those were fair
questions and we looked forward to hearing the response to the results
of the consultation. Unfortunately, it seems that the Government
decided not to answer those questions or, rather, by coming out with
their proposal for authorised signatories, said that
they were all answered. We do not think that that is adequate. I know
that the Government have been under time pressure during the
consultation but20 complicated Government amendments were
filed a few days ago and we have not been able to consult on them. So,
as far as we are concerned, it has not been a good start to
consideration of this clause. However, it is clear that the
Government are moving on from the concept of the company secretary to
that of the authorised signatory. We believe that there is room for
both. Having made that clear, and on the basis that we want to return
to this issue when considering part 12, let me move on to the
provisions relating to authorised signatories.
I note the position of the
Institute of Chartered Secretaries and Administrators, which put a
strong case in its note of 15 June 2006. It said:
“The proposed authorised
signatory regime may provide further flexibility to some companies, but
this new regime will not suit all private companies. The authorised
signatory, as proposed in the draft clauses from the DTI, is a
different beast to a secretary and can sign any document on behalf of
the company. This contrasts with the secretary’s automatic
powers, which beyond their statutory powers, have been established in
case law to be limited to signing documents of an administrative
nature.” The
Secretary of State made clear on Second Reading that he supports the
optional regime, but he and many others may not have realised that all
the statutory power of a secretary of a private company has been
completely stripped away by the Company Law Reform Bill as drafted.
Where the board of a private company wants the secretary to continue in
his position post the enactment of the Bill, it will find that all the
secretary’s automatic statutory powers under the 1985 Act to
certify and execute documents and file returns to Companies House will
no longer exist. For any of the 2 million private companies that find
their secretary useful and want to continue to employ such a person,
there will be the confusing burden of having to set up appropriate
authorisations to try to mimic the current statutory powers that are
well understood. The new burden will bring complication, not
simplification. A secretary remains an officer of the company, so his
statutory powers should be clear along with his
liabilities. Should
such a company want to appoint a secretary, there is no provision for
it to register the appointment at Companies House. Registration is
essential, as it provides an easy authorisation check for third parties
dealing with the secretary. It is common sense that the automatic
powers under the 1985 Act should continue to apply to those secretaries
who continue in their position, and it should be possible to register
future secretary appointments at Companies House. It is not difficult
to amend the Bill to capture the idea that private companies have a
choice as to whether to have a secretary, and that the existing powers
will apply if they do have one. It will be far more burdensome and
confusing for companies if the Bill is left as
drafted. These are
important points. In fact, the more I consider the subject, the more I
wonder why we need an either/or approach. Why not retain the secretary
regime for those companies that have them, which admittedly will be far
fewer after the Bill comes into effect, but also put in place an
authorised signatory regime?
Having said that, we do not have
a problem in principle with the concept of the new authorising
signatory regime per se, but given the lack of time—those
comments were received in the brief time since the amendments were
tabled—I must reserve our right to come back on the detail of
the provisions on Report. I look forward to hearing the
Minister’s explanation of how the separate register and
execution powers will work in
practice.
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