Vera
Baird: I am sorry that I had not realised that part of the
thrust of the amendment is the same point that we debated on Tuesday.
The same answer applies as applied then; this is about becoming
registered. It is not about continuing to be
registered.
James
Brokenshire: I am grateful to the Minister for that
intervention, but in our debate on Tuesday we suggested that the point
covers both circumstances. The thrust of my amendment is based on the
fact that this is not just a pre-incorporation situation. It perhaps
underlines the thrust of my original amendment, which suggested that
the word “registered” might need to be looked at
carefully in terms of the context in which it
arises. The same point
that I made on amendment No. 129 arises in part on clause 68: we did
not discuss the Secretary of State’s power to direct a company
to change its name if it has been registered in a name that is the same
or similar. There is some crossover between
that and clause 70 and the twin-track approach. The Minister says that
there should not be a problem but I think it needs a further cold towel
to ensure that the interrelationship between the clause 68 regime and
the clause 70 regime works effectively and that there is no
misuse. I will not
press amendments Nos. 129 and 130. I hear what the Minister says about
the fact that non-companies could appear on the index and I am grateful
for her explanation. I still feel that that should be speeded up and
that any gap or potential issue is reduced as much as possible because
clearly it is not in the interest of a company seeking to register if,
having done its search of the index of names, discovered nothing, it
then finds out that there was a problem. That would be
unacceptable. I am
grateful for the Minister’s comments on amendment No. 131. I
agree that it is a matter for the parliamentary draftsmen to look at
the most effective way of dealing with the “in writing”
point. If later in the Bill it could be stated that directions from the
Secretary of State in all circumstances shall be in writing, it would
save us having to put “in writing” in each context in
which it arises. I respect the way that the Minister addressed that
amendment. I note what
the Minister said about linkage with the UK. All I would ask is that
the issue be kept under close scrutiny. I would not like to think that
this power was misused or used in a way that was not currently
anticipated and that a creditor from outside the United Kingdom could
seek to use its powers to intimidate and put pressure on the smaller
company in this country and use the sort of inequality of arms argument
to which I alluded. Again, I am grateful for her response. We will need
to keep the matter under close observation. I also note the
Minister’s comments on amendments Nos. 252 and 253, which were
prompted by concerns raised by the CBI. I am grateful for her assurance
that this matter will be looked at in further detail and therefore I
look forward to receiving further information and details in that
regard. The one area
on which I am not satisfied relates to amendments Nos. 136, 138 and 139
and the proposal for an interim order. I hear what the Minister says
about a company’s ability to protect its position by
incorporating a limited liability company and undertaking the name swap
that I mentioned.
This tranche of clauses is
intended to protect against opportunistic registration in circumstances
where the respondent’s main purpose in registering the name is
to obtain money from the applicant or prevent him from registering the
name. I find it extraordinary that having been presented with a serious
problem that unfortunately occurs fairly frequently, the Government are
not minded to consider the issues that I alluded to in my opening
comments. Why should they not also address the problem of opportunistic
registration instead of saying, “Sorry, you’ve just got
to register a limited liability company and that’s
it.”? Mr.
Jonathan Djanogly (Huntingdon) (Con): My hon. Friend makes
a persuasive argument. The Minister spoke about the ability to set up
another company and name swap, which is used daily throughout the
country. Thousands of companies, if
not tens of thousands, exist simply because of a name swap. That
distorts the picture of how many companies we have and for what purpose
they exist, but it is also a huge waste of resource, and indeed civil
service resource, to wind such things up when they are not
needed.
James
Brokenshire: I am grateful to my hon. Friend for his
intervention. The drafting of the amendments is quite narrow and meant
to cover a specific problem. Therefore, it is surprising that the
suggestion is, “You’ve just got to do what you should
have been doing in the first place.” It is recognised that that
is what companies could do to protect themselves, but if a company is
being opportunistic and using this as a mechanism to extort
money—it does happen—it is unfortunate that the
Government will not take that serious issue on board. I am therefore
minded to press the relevant amendment to a
Division.
Vera
Baird: I did mention the potential that the hon. Member
for Huntingdon talked about. It is used, and it is not very resource
intensive—it costs about £20—but he has a point
about winding up such affairs at some
stage. I also said
that if that has not been done and there is a challenge, whether before
or after a circular has been published, that is what the proceeding in
the statute is all about. Nothing would be added by the amendments. To
call this an interim procedure is not realistic, because if the
adjudicator is satisfied that opportunism exists, he
“shall” make an
order “requiring the
respondent to change its
name”. It is a final law,
just like the one in the statute. Why is the amendment
better?
James
Brokenshire: I am grateful to the Minister for clarifying
her thoughts. The concept that this is an interim measure would have
ensured that it was shown to enable a formal challenge under the more
general clause 70 regime, so that a plc in those circumstances could
seek redress with the speed anticipated by the clause. A more
wide-ranging debate on goodwill could happen thereafter. In terms of
the balance of risk and harm, the interim order would work by
addressing the larger evil in such
circumstances. I fear
the Government’s good intentions to deal with opportunistic
registration arrangements. I do not question or doubt the intent behind
the proposals, but I fear that they will not resolve the issue.
Unfortunately, deals involving brown envelopes will have to continue
because of embarrassment and the speed that I alluded to in relation to
the 21-day period. When we come to later debates on resolutions, we
might consider a shorter notice period for general meetings.
I do not think that the
Government’s structure, even with the best of intentions, will
deal with the matter. It is a pity that opportunist registrations to
extort cash out of companies will not be addressed if the amendments
are rejected.
Amendment No.
137 relates to goodwill. I am grateful to the Minister for her comments
on trademarks and clarification, which are much appreciated. I hear
what she says about start-ups and the costs that have to be analysed,
and I will not press the amendment to a
Division. However, amendments Nos. 136, 138 and 139 raise a significant
issue, and I will divide the Committee on amendment No. 136, as it is
the most important. I
beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Clause
67 ordered to stand part of the
Bill. Clauses
68 and 69 ordered to stand part of the
Bill.
Clause
70Objection
to company’s registered
name Amendment
proposed: No. 136, in clause 70, page 30, line 6, at end
insert— ‘(6A) Without
prejudice to the foregoing provisions of this section, in the event
that all of the circumstances contemplated in subsection (8) are
satisfied, an applicant may apply to a company names adjudicator for an
interim order under this
subsection. (6B) The
circumstances referred to in subsection (7) are
that— (a) the
applicant is a company whose shares are listed on a regulated
market; (b) the
applicant has published a circular to shareholders incorporating a
resolution proposing to change its name to a particular name (a
“relevant name”);
and (c) a company
(the “respondent”) has been incorporated with the
relevant name or changed its name to the relevant name in either case
on or after the date of publication of the circular referred to in
subsection (8)(b). (6C) If an
application for an interim order is made and the adjudicator is
satisfied that the provisions of subsection (8) are satisfied, the
adjudicator shall make an order requiring the respondent to change its
name to a name specified by the
adjudicator. (6D) The
adjudicator must give notice of his interim
order— (a) to the
applicant; (b) to the
respondent; and (c) to the
registrar. (6E) Upon the
presentation by the applicant to the registrar of an official copy of
the interim order together with all other documents contemplated by
section 78 (Change of name by special resolution), and the registrar is
satisfied that— (a)
the relevant name complies with the requirements of this
Part, and (b) the
requirements of the Companies Acts and any relevant requirement of the
applicant's articles, with respect to a change of name are complied
with, the registrar must enter
the relevant name as the new name of the applicant and enter the name
set out in the interim order as the new name of the respondent on the
register in place of the former names of the applicant and respondent
respectively. (6F) On the
registration of the new names, the registrar must issue a certificate
of incorporation to each of the applicant and the respondent altered to
meet the circumstances of the
case. (6G) The making of an
interim order shall be without prejudice to any other legal rights of
the applicant or respondent or any application by the respondent under
subsection (1).'.—[James
Brokenshire.] Question
put, That the amendment be
made:— The
Committee divided: Ayes 7, Noes
9.
Division No.
6] Hodge,
right hon.
Margaret Question
accordingly negatived.
Clause 70 ordered to stand
part of the
Bill.
Clause
71Company
names
adjudicators 1.30
pm Question
proposed, That the clause stand part ofthe
Bill.
James
Brokenshire: The clause makes detailed provision for
company names adjudicators, but raises a number of questions. How many
company names adjudicators will be created? What will be their annual
cost? How will that cost be met? Will the adjudicator service be met
out of fees and costs charged to relevant companies or from another
source? What functions will be assigned to the chief adjudicator? To
whom will the chief adjudicator and the company names adjudicators be
accountable? Will appointments be full-time or part-time? How many
other staff will be employed? Whose offices will the adjudicators work
from? Will the chief adjudicator have a separate office? Where will
hearings be held—in court rooms or other buildings? What
requirements are there for adjudicators to report on their work to
Parliament or any other body?
I would be grateful for some
clarification. The wording in clause 71 is brief and talks about the
appointment, but we do not have the context or the information about
what that will mean practically. I would be grateful for the
Minister’s response on at least some of those
issues.
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