David
Howarth: The hon. Gentleman has just defeated his own
argument. If a large number of companies do not want to entrench
because of the commercial consequences of doing so, the dangers he is
talking about will not
follow.
Mr.
Djanogly: With respect to the hon. Gentleman, that is a
weak argument. The vast majority of companies respect and appreciate
the framework in which they have been operating and have no wish for
change. The Institute of Directors made that clear, and referred to its
points earlier. I am
sure that CICs are being set up for valid charitable and voluntary
objectives, and if they want certain elements in their constitution to
be entrenched, that perhaps is the way we should go, but it should be a
matter for CICs. I
think that the Minister agreed that CICs will have separate
legislation, and they will form their own separate group as we move to
consolidate the provisions. Conservative Members have argued for
consolidation for three or four years, so none of us will argue against
it. If the Minister wants to present arguments for entrenchment in
relation to CICs, that is the place to do it.
As it happens, we shall have a
formula for entrenchment that no companies seem to want, and the
justifications that I have heard are very weak. I do not see how
shareholder democracy will be enhanced by these provisions; indeed,
quite the opposite—it will only be damaged. It might seem like a
great idea to have entrenchment provisions when companies are first set
up, but those companies that do will regret it, and there will be a
dispute among the
shareholders.
Mr.
Vara: Does my hon. Friend agree that companies that think
entrenchment provisions a good
idea in principle might subsequently find them barrier? A bank that is
looking to give a loan might say that it is unhappy with the
restrictions imposed by the constitution and might be reluctant to give
the loan to assist further business.
Mr.
Djanogly: My hon. Friend makes a very good
point. It being One
o’clock, The Chairman adjourned
the Committee without Question put, pursuant to the Standing
Order.
Adjourned till this day at
half-past Four
o’clock.
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