The
Chairman: I listened to the hon. Gentleman who obviously
has a legitimate point of order, but the matter is outside the remit of
the Chair and I cannot make the recommendations that he requests. They
are a matter for the usual channels and, if there is agreement, they
can return with a further motion for the Programming
Sub-Committee.
The
Minister for Industry and the Regions (Margaret Hodge):
Further to the point of order, Mr. Illsley. I can provide
clarification. Hon. Members will recall that the reason for our further
consolidating other aspects of company law is that there was consensus
between all political parties, when the Bill was considered in the
House of Lords, that it would make sense to put in one place all the
legislation that had an impact. It was decided on the basis of that
consensus and with the recognition that the new clauses in question are
not ready in the same way as the rest of the clauses
are. We have given an
undertaking that we are not, by the consolidation, changing the law,
except to make it fit with other clauses. There is no change to
existing legislation except in so far as it makes sense to do it in
that way. Clearly, there is a limited time frame and we want to get the
Bill on the statute book. We think we are being helpful in explaining
to hon. Members of all parties that we are introducing the new clauses
in Committee; that we want discussions with experts outside the
House—particularly the Law Society—and any members of the
Committee who want to participate, all through the coming period; and
that if, on Report in the House of Commons before the Bill returns to
the House of Lords in October, in the spill-over phase, any amendments
that have arisen from that discussion can be tabled at that point, in
the spirit of consensus. That is the practical way of going ahead,
unless we put the new clauses into a new piece of
legislation.
I hope that
hon. Members will work with us in the spirit of co-operation that we
have tried to engender. I am happy to meet Opposition Members of
whatever
party in the period in September and early October, before we return for
Report and Third Reading in the House of Commons, and before the
Bill’s subsequent return to the House of Lords, to try to reach
agreement on the new clauses. We are not trying to pull a fast one. We
are simply trying to make sense of the current legislation and put all
company law legislation in one
place. David
Howarth (Cambridge) (LD): Further to that point of order,
Mr. Illsley. We share the concerns of the official Opposition about the
time scale that is appropriate for the consolidation, but we have
listened to what the Minister said and will reflect carefully on it.
However, it seems to us that our original proposal, made by my
hon. Friend the Member for Kingston and Surbiton (Mr. Davey) on Second
Reading, is the appropriate approach and that the Committee should sit
briefly after the recess, simply to deal with the consolidation
clauses, in case there are problems and
errors. There is an
old saying among French lawyers that to codify is to modify. Some
change always happens when an attempt is made at codifying, simply
because of the different context. I think that the summer will be
needed for thought about that.
Mr.
Blunt: Further to that point of order, Mr. Illsley. I have
reflected on what the Minister said. I think that the difference
between Conservative Members and the Government is whether the matter
should be considered in Committee or on Report. We are firmly of the
view that it is appropriate for examination by the Standing Committee.
We shall all be tediously familiar with it by July and would thus have
the opportunity to use our knowledge for the benefit of the House in
October, rather than having to deal with the matter on the Floor of the
House on Report. I
have another request to make of the Government: that we have a
consolidated, newly printed Bill, however matters are to go forward,
ready for the return of the House in
October.
Margaret
Hodge: Further to that point of order, Mr.
Illsley. I want to be helpful. We shall certainly try to produce a new
consolidated Bill in time for that consideration; it certainly makes
sense and we shall try to act accordingly. I understand the point made
by the hon. Member for Cambridge (David Howarth) about the possibility
of our inadvertently amending provisions in the process of
consolidating. That is not our intent. We shall all have the entirety
of the summer recess to examine the amendments. We are introducing them
in Committee now so that we can look at them in detail in consultation
with the Law Society and others to see whether we have inadvertently
made a mistake. Of course, we are consolidating existing law, which has
been subject to full consideration under all the due processes of the
House, and we are not introducing new laws, which it would be
legitimate to discuss in Committee and
beyond.
The
Chairman: To confirm the issues raised by the hon. Member
for Reigate (Mr. Blunt) in his point of order, the Committee will
dissolve and report to the House on 13 July. It will not meet after
then. If hon.
Members are given any information after that, it will be in their role
as Members of the House of Commons, not as members of the Standing
Committee.
David
Howarth: We return to the question that we debated at the
end of last week—the balance between two issues, on which I
think both sides of the Committee share the same outlook. On the one
side, there is the principle that there should be transparency in share
ownership and that people who own shares should be prepared to be
contacted by other members of the company and perhaps by members of the
public to debate and defend positions in the company. On the other
side, there is the problem, which has arisen largely because of animal
rights terrorism, of shareholders sometimes being intimidated and
threatened with, or actually suffering, physical violence as a result
of their shareholding.
We became slightly overheated,
and the debate gave the impression that there was a fundamental
difference between the parties, but I do not think that there is. The
Government’s position is that the principle of absolute
transparency must be compromised because of the problem of threats and
the intimidation of shareholders. They have rightly introduced a
proposal to deal with the problem and to balance the two issues that I
mentioned. A company faced with a request for a list of its
shareholders is to have the option of complying with that request or
going to the court, in which case the court would determine whether the
request was made for a proper purpose. The Government have included the
additional protection that any person who passes information on for
improper purposes commits a crime. Let it not be said, therefore, that
their position does not compromise the principle of absolute
transparency, because it does.
The question raised by the
amendments is simply whether the Government have got the balance
between the two things right. The hon. Member for Huntingdon (Mr.
Djanogly) proposed a further, although not major shift in the direction
of protecting shareholders. He would allow companies to protect their
lists of shareholders when there is a threat to those shareholders and
when the Secretary of State can be persuaded that that threat is
sufficient to close the list.
The Liberal Democrat amendments
offer slightly different approaches, but pursue basically the same
direction of change. They would slightly shift the degree of protection
in favour of shareholders and slightly close the opportunities
available to people who want to intimidate shareholders. We offer two
possibilities. The first, which is rather simple, is encapsulated in
amendment No. 168 and consequential amendments Nos. 170 to 176. All the
proposal would do is reverse the burden of proof. Under the
Government’s proposal, the company can either comply with the
request to hand over its list of shareholders or go to the court. Under
our proposal, the slight change would mean that the company could
refuse on the ground that the request is improper, and the applicant
would have to go to the court. The other amendments are drafting
amendments to ensure that the proposal works within the
statute.
10.45
am The reason why
we propose the amendments is that there is a legal principle—I
guess the court would
follow it to interpret the clauses—that the person who asserts
something has to prove it, unless the statute says that the burden of
proof lies elsewhere. In the normal course of events, he who asserts
must prove. The Government have established a system under which, at
least initially, the company will have to prove that the purpose is
improper. With repeat applications, the Government’s proposal
reverses the burden of proof. When people repeatedly go to the court
with requests, the Government propose that they are batted back without
further argument. Our change is minor, as we propose to change the
burden of proof for the first application,
too. Paul
Farrelly (Newcastle-under-Lyme) (Lab): Does the hon.
Gentleman agree that in this country a powerful bulwark against
over-mighty government isa free press? Under his proposal, can
he imagine what a fraudulent company would do to every journalist who
asked legitimate questions of its shareholder register? His proposal
would force them to go to court time and again. Can he imagine what
effect that would have on proper investigative
journalism?
David
Howarth: The burden of proof that we propose is exactly
the same as that in libel law, so if the hon. Gentleman wants to engage
in a debate about the entirety of media law, he is perfectly at liberty
to do so. However, we do not propose anything unusual or more
restrictive on press freedom than already exists in law. If a newspaper
were to go to a court to explain its purposes, that in itself would be
even more embarrassing for the company. It would have to take that into
account when it refused the application.
Paul
Farrelly: In advance of remarks that I shall make later,
let me say that the hon. Gentleman is entirely wrong on that
point.
David
Howarth: I am not too sure on which of my various points I
am entirely wrong, so I shall give way again to enable the hon.
Gentleman to be more specific.
Paul
Farrelly: The hon. Gentleman is wrong on every point that
he has made. His amendment to reverse the burden would result in a
major change and a major restriction on press freedom in financial
investigations.
David
Howarth: I fear that neither of us has any great
experience in financial journalism, so I do not know which angle he is
coming from.
Paul
Farrelly: If the hon. Gentleman would like to see me after
class, I shall take him to my office to show him the 12 years of
clippings that culminated in my position as City editor on The
Observer.
David
Howarth: I shall be glad to look at the hon.
Gentleman’s clippings. However, perhaps also after class, I can
show him my 20 years of experience teaching libel law. I assure him
that my amendment would make no great difference.
Returning to the point, the
question that we are trying to ask the Government is precisely why they
have
chosen that particular balance. Contrary to what the hon. Gentleman
says, it seems that they have gone a long way towards the position that
we propose, especially on second, third and subsequent applications.
The question we are trying to ask is why, in the first application
only, do the Government put the burden of proof on the company, not the
applicant? That is the only difference between us and the
Government. The
second proposal that we are offering the Government is new clause 22,
which would allow a company to close its list by special resolution.
Such a company would, however, come under a new obligation to
circulate, for a reasonable fee, any lawful information or
documentation that an outsider or a member wanted to circulate to those
on the list of shareholders. In making such a proposal, we are trying
to preserve the right of members of the company and people in general
to approach shareholders and to put their views on, for example, the
ethical standards to which the company is or is not adhering. We are
trying to do that in a way that does not require the company to reveal
the shareholders’ names and addresses, because that would
provide added protection from intimidation and threats of violence,
without closing down debate with members of the company or the public.
Members of the company would still receive information that they might
or might not find helpful in holding the company’s directors to
account and in deciding whether to continue investing in the company.
We offer new clause
22 as a third possibility, so there are three alternative proposals on
the table.
Dr.
Nick Palmer (Broxtowe) (Lab): As the MP for an area with a
pharmaceutical company, I appreciate the issues that the hon. Gentleman
raises, but does he not agree that the long-term concern is more about
improper financial holdings? Although new clause 22 would allow people
to lobby a company’s shareholders, it would completely rule out
the possibility of journalists or others investigating peculiar
shareholdings, as my hon. Friend
suggested.
David
Howarth: I accept that that is a danger of the new clause.
I was going to say that there might be a case for a composite amendment
that combined new clause 22 and the corresponding new clauses tabled by
the hon. Member for Huntingdon. I accept that the new clause is
defective in that it does not require outside control over the use of
the power involved, and the new clauses tabled by the hon. Member for
Huntingdon have the merit of requiring the permission of the Secretary
of State, who would presumably take any danger into account in deciding
whether to grant the company’s request to close its list.
Another possibility, of course, is that one should go to the court,
rather than to the Secretary of State. All those possibilities are on
the table, although they all have
defects.
Margaret
Hodge: Going to court is precisely what is suggested in
our
proposal.
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