Mr.
Djanogly: Would not that take away one of the advantages
of being
unlimited?
Margaret
Hodge: I do not follow that
point.
Mr.
Djanogly: I make the point in so far as one of the
advantages of being unlimited is not having to disclose things that
limited companies have to
disclose.
Margaret
Hodge: In this case, however, in relation to statements of
capital, we suggest that such information should be disclosed. If the
hon. Gentleman sees that as an advantage, then yes, the proposal would
change the companies’
position. The new
clause requires companies that re-register to provide an updated
statement of capital within 15 days unless the same information has
already been provided in another way, thus ensuring that publicly
available information remains up to
date.
Mr.
Djanogly: I am sure that some company out there will read
the Minister’s comments and thank her for clarifying the issue.
We have nothing to add, and will not oppose the new
clause. Question
put and agreed
to. Clause 107
ordered to stand part of the
Bill. Clauses
108 to 110 ordered to stand part of the
Bill.
Clause
111The
members of a
company Question
proposed, That the clause stand part ofthe
Bill.
Mr.
Djanogly: We have now moved to part 8 of the Bill, which
deals with members of a company. I shall make two points, on
subsections (1) and (2).
First, in respect of subsection
(1), Lord Hodgson tabled an amendment to the clause suggested by the
Law Society to seek to clarify whether a specific allotment of
subscriber shares was required following the company’s
registration. He proposed the amendment on the basis that there was
confusion in the 1985 Act. He felt that the clause did not make it
clear whether the shares in a company are allotted to the subscribers
on the registration of the company or whether a formal allotment and
the filing of the return of allotments was necessary, and he felt that
that should be clarified. The amendment was withdrawn as
Lord Sainsbury agreed to consider the matter further. To be frank, he
may have done so—I may have missed a proposal, as we have been
swamped with Government amendments on this Bill—but in any
event, I would appreciate the Minister’s clarification of the
point. Secondly,
subsection (2) in many ways deals with the core of the concept of
ownership. It
states: “Every
other person who agrees to become a member of a company, and whose name
is entered in its register of members, is a member of the
company.” When a share is
transferred, the person who agrees to become a member needs to have the
stock transfer form duty stamped before it can be entered in the
register of members. Without that, beneficial ownership exists, but
legal ownership cannot do so. To pay stamp duty, one would take the
stock transfer form and a cheque down to Bush house, but now that
service has been abolished and there is a postal period of supposedly
up to 10 days before stamp duty can be paid and therefore entry made in
the register under clause 11 too.
Why did I bring up this matter?
I did so because solicitors and others who have to pay stamp duty
before they can register the transfer have been complaining about it. A
solicitor wrote to me and complained that they heard that delays of
much more than five days are occurring. One lawyer told me that he had
to chase a delayed transfer and was advised that Bush house had no
mechanism for checking the progress of forms, as apparently it was
inundated with stock transfer forms and had a huge backlog. He was told
that his best option would be to call up his bank and check to see
whether his cheque had cleared. That was not appropriate.
I wrote to the Secretary of
State on this matter, and it was duly handed over to the Treasury,
which I found inappropriate. I am not arguing from a tax point of view;
I am arguing from the point of view of subsection (2), which relates to
people wanting to transfer their shares and be entered as members of a
company. I am not talking about whether they have paid the tax or about
how they have done so. That is a mechanical issue that should be got
out of the way as soon as possible so that people can comply with the
provision.
Nevertheless, the matter was
handed over to the Treasury, which was not the right thing to happen,
and I received a reply from the Economic
Secretary: “Following
the introduction of stamp duty land tax, there has been a significant
reduction in the number of documents that require stamping, and the
number of personal callers at the London counter has declined over
recent years.”
The reply went on to explain that the
office was therefore closed on 31 March, and it
continued: “Completed
stock transfer forms, along with payment of the stamp duty, are all
sent to the London Stamp Office at Bush House. HMRC has undertaken to
process documents within its published five-day turnaround time
provided that the correct payment is made at the time. Feedback so far
under the new arrangements has been good, with customers happy with the
level of service they are receiving. There have been very few
complaints from customers affected by the counter service closure about
the speed with which documents are handled and returned. You have been
told that, in some cases, longer delays are occurring. Practitioners
may have experienced turnaround times of more than five days after the
London office counter closed, due to the unusually high volume of
prepaid forms received. However, the resulting backlog of work is now
being cleared and customers should no longer experience delays above
the published turnaround time. HMRC has also put in place contingency
plans to enable it to meet its published turnaround times for stock
transfer forms should high volumes occur in
future.” On
that basis, I thought that progress was being made, until on 19 June I
received another e-mail from another solicitor, which I assure the
Minister was totally unsolicited. It
stated: “The
loss of the over the counter facility at Bush House is a
nightmare—we sent the form on 1 June but have had no
acknowledgment other than verbally that they ‘have a
backlog’ and can’t even tell us they have received the
transfer yet! I can’t register the transfer and finish off
the...work.” I
deleted an expletive there. It
continued: “No
doubt they have hundreds of people answering the phones to tell all the
frustrated users similar things. Is something being done about this
example of Government
incompetence?” That is
the situation. While one arm of Government—in this
Committee—is trying to deregulate, another arm, the Treasury, is
slowing down the whole process. In practice, this arrangement is very
inconvenient to practitioners, because it requires the buyer to have
the sellers enter into a trust deed so that before registration of the
transfer, the sellers, who remain as legal owners, promise to act as
the buyer wishes in respect of the shares. That is not good practice.
It is creating more red tape for companies and I ask the Minister to
assure us that she will address the issue so that transfers and entry
in the register can be speeded
up.
3.30
pm
Margaret
Hodge: The purport of that contribution related not
to whether the Bill is correctly drafted in the way that members of the
Committee find acceptable, but to the running of the stock transfer
system by the tax office. I assure the hon. Gentleman that he is doing
the right thing in raising matters with the Economic Secretary and that
he should continue to do so. Implementation is a matter for my hon.
Friend and HMRC, not a matter for consideration under the
Bill. The only other
point that I want to make is that the clauses were considered in
another place andclause 16(5) now makes it clear that
subscribers become the holders of shares that are taken by them on
formation. That may sort out the position of those who have a
transfer. The hon.
Gentleman’s point seemed to be one of implementation. It has not
been raised with me, but it
clearly has been raised with the hon. Gentleman most recently. He should
therefore take up the matter with the relevant Departments and
Ministers. Mr.
Djanogly: I am talking about the practical implementation
of the clause. In order to be registered as members of a company,
people have to pay stamp duty before they are registered. People are
paying stamp duty, but they cannot register because their payment is
not being accepted. The Minister says that I should write to the
appropriate person. I did that. I wrote to the Secretary of State for
Trade and Industry. The fact that he took it upon himself to send my
letter to the Treasury shows me that he did not understand the point
that I was making. It is not a Treasury matter. It is a problem for the
Department of Trade and Industry. The Treasury wants to do its own
thing. I am saying that the problem is for the Minister’s
Department. She must get a grip on it so that the practical
implications of the clause can be realised and so that practitioners
and those who want to be registered as members can do
so.
Margaret
Hodge: The issue before the Committee is whether the
process as we have defined it in the Bill is appropriate. Nothing in
the hon. Gentleman’s contribution suggests that the process is
anything other than correct. He described problems with implementation
that have been drawn to his attention. Because in this instance
implementation is a matter for the Treasury and HMRC, it is an issue
that he must raise with appropriate Ministers. Obviously, in relation
to the Bill we wish registration to take place as quickly as
possible.
Mr.
Djanogly: If the Minister would at least offer to approach
the Treasury and move it along a little on the issue, that may be of
great help to many companies and individuals who want to transfer their
shares and register
them.
Margaret
Hodge: The hon. Gentleman is referring to a tax issue, and
I shall draw it to the attention of my hon. Friends who have
responsibility for such
matters.
Mr.
Djanogly: There are implications for your
Department.
Margaret
Hodge: We want registration to take place as quickly as
possible. That is clearly in everyone’s interests. It seems that
what has been drawn to the hon. Gentleman’s attention is a delay
in the tax process, which, as much as I might love it to be my
responsibility in some ways, as it would give me access to some of the
revenue as well as collection responsibilities, is not a matter for my
Department. I undertake to let the relevant Ministers in the Treasury
have copies of the Hansard report of what the hon. Gentleman has
said and see what response we receive from
them. Question put
and agreed
to. Clause 111
ordered to stand part of the Bill.
Clause
112Register
of
Members
Mr.
Djanogly: I beg to move amendment No. 23, in clause 112,
page 50, line 17, after ‘addresses',
insert ‘(which, for the avoidance
of doubt, need not be a home
address)'. The
clause relates to section 352 of the Companies Act 1985. Later I shall
speak more fully on the problems caused by access to home addresses on
the register of members. At this point, it is worth clarifying that
there is no need to use a home address on a share transfer form or in
the register of members. A service address can be used, such as that of
a person’s accountant, bank or post office. Of course, having
the name appear on the register, whatever the address, can create its
own problems, particularly if the name is a rare one, which is why the
ability to deny access is important, as we shall discuss
later. I would like to
receive the Minister’s confirmation of one aspect of the matter.
The July 2002 consultation document, “Regulatory Impact
Assessment on Disclosure of beneficial ownership of unlisted
companies” noted that the current registration system does not
reveal any information regarding the beneficial ownership of shares.
For that reason, the document noted, attempting to establish the
ownership of the company by referring to the register has its
limitations, as there is no means of discovering who beneficial
shareholders are. To solve that problem, those responsible for the RIA
were asked to consider a proposal put forward by the DTI and HM
Treasury that a person must disclose to a private company, once their
beneficial interest in shares exceeds 3 per cent.. The company would
then be obliged to enter those details on a subsection of the register
of members. Will the Minister confirm that that proposal will not now
be proceeded with? I
would also appreciate the Minister’s clarification on a slightly
different topic, which was raised in the Lords. I tabled a written
question, to which I received a reply on 2 May. I asked:
“How many registered companies
have issued stock?” The
response that I received from the then Minister
was: “Section
121(c) of the Companies Act 1985 permits a company to convert any or
all of its paid-up shares into stock, and reconvert that stock into
paid-up shares of any denomination. There are no available figures on
the number of existing, registered companies that have used that
procedure. However, the ability to convert shares into stock is to
believed to be obsolete.” —[Official Report, 2 May
2006; Vol. 445, c. 1365W.] Can
we not now just get rid of
stock?
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