Mr.
Djanogly: We have had a useful debate on clauses 115, 116
and 117. Having heard the various contributions and interventions
relating to my speech last week, it might be helpful if I say a few
words about what we are not proposing, as much as about what we are
proposing. We are
certainly not ignoring previous legislation in this area. I appreciate
that the Minister recognised our input and review of previous
legislation, such as the Serious Organised Crime and Police Act 2005,
and
other aspects of economic terrorism. The hon. Member for
Newcastle-under-Lyme accused us of playing fast and loose with company
law. I can only say that we believe that it was important to raise
those issues in Committee with the specific aim of having a full debate
to cover the ground and to ensure that the issues, including both
extremes as well as the bits in the middle, have been
discussed. We are
certainly not ignoring the Government’s willingness to improve
the situation where that exists, and we appreciate that clause 115 as
drafted moves the debate forward positively, although we believe that
the clause needs to be refined—as it stands it will not work
adequately or be totally fit for purpose. In interventions during my
speech last week, the Minister noted that the hon. Member for Cambridge
and I were invited to the Department of Trade and Industry to discuss
the clauses—I appreciated that offer—and although we made
our position clear at that meeting we also received draft clauses which
I took away and looked at. Many of the comments that I made last week
and today were based on my views of the Government amendments that were
given to me at that
time. Furthermore,
from our point of view, and as I explained to the hon. Member for
Newcastle-under-Lyme, this is not just a debate about animal rights
terrorists. I made the point that we believe that the attacks on pharma
shareholders will be just the preliminaries of a wider campaign against
other sectors, if we do not get on top of the issue. We recognise that
registers are already being misused for a variety of illegal purposes.
I gave the example of the offshore boiler-room criminal
gangs. Another
important point is that the debate, to us, is not just a matter of
protecting home addresses. The Minister said, in relation to new clause
3, that service addresses can be used, so that an individual can deal
with the problem within the existing law. I made the point, in response
to an intervention last week, that sending a threat to a service
address can be just as bad as sending it to a home address.
Furthermore, people may not want their names to be
revealed. Finally, to
us the debate is not about ending public access to shareholder
registers, as, I think, the Minister appreciated. The amendment that
would restrict access to those who own a certain percentage of shares
is not our policy; we tabled it on a probing basis so that that
question could form part of the debate. I should point out that
concerns have been raised by, for instance, credit agencies, that even
the Government’s proposals go too far. That aspect of the matter
was debated in the House of Lords Committee. As the hon. Member for
Cambridge said, the Government themselves propose through the clauses
to restrict public access. The debate is therefore about not extremes
but degrees, and about whether the provisions approach the right
degree. After giving
no little time to his impressive CV, the hon. Member for
Newcastle-under-Lyme described, but in a very unspecific way, how the
amendments would affect investigative journalism and hurt corporate
governance. I think that those were his main points. He will have to be
a little more specific, although I agree, basically, with his comments
about access not being allowed without 5 per cent. share
ownership. Even then, however, as the hon. Member for Cambridge noted,
the hon. Gentleman mixed up his amendments. The debate should be about
protecting individuals from the use of their names or addresses for
illegal purposes. Now that we have heard the debate on the
Government’s proposals I shall set out our position. The
Minister asked why we have, for instance, maintained that the
Government’s proposals do not go far enough, and I want to deal
with her
points. We
remain concerned that Companies House is being kept in the equation. We
can see no need for double disclosure. We think that we should simply
stop companies having to provide details of members to Companies House,
and then debate the question of access to details attaching to the
companies’ registers of members. We shall table amendments to
that effect, and we still maintain that that should be set out in the
Bill.
Margaret
Hodge: Is the hon. Gentleman suggesting that the only
access to details of the membership of particular companies should be
through the company
itself?
Mr.
Djanogly: I am saying exactly that. Of course, Companies
House has to publish details of members once a year. At any time the
register as it is found at Companies House will be out of date. If the
Minister is suggesting that people should use that register for any
purpose requiring accuracy, that will not do. The only way to find out
who the members of a company are is through the
company.
Margaret
Hodge: That is a dramatic change in the current
transparency. I have two points to put to the hon. Gentleman. First,
the discipline of having to provide an annual return to Companies House
is a way of getting companies to keep their registers up to date. All
our evidence, from all the stakeholders, is that without that
discipline it would not happen.
Secondly, the hon. Gentleman
must accept that on occasion perhaps an investigative journalist, or
perhaps an existing member who thinks that the directors, in a private
company where some of the members are also directors, are not working
in the interest of the company, will want access. There will be such
circumstances, in which people want to have access to the register of
members without the directors of the company necessarily being aware.
The hon. Gentleman must accept
that. 12
noon
Mr.
Djanogly: I do not accept that at all. What is filed at
Companies House is not the current register of members of a company but
a copy of the register at a set date. An investigative journalist going
to that copy of the register could well name people who are no longer
shareholders of the company. The Minister also seems to miss the fact
that the basic need is covered in the Companies Act 1985. If an entry
in the register is not made, an offence has been committed. The annual
return is simply a reflection of what should have been done under the
law, it is not the law itself.
Paul
Farrelly: The hon. Gentleman said previously that I had
not been specific. I did not want to delay the Committee, but I can
give him plenty of specific examples, from the Ostrich Farming
Corporation to the Alchemy pyramid selling scheme to the Facia collapse
that floored Stephen Hinchliffe, in which third-party access was vital
not only for journalists but for those investigating financial crime. I
suggest that the hon. Gentleman talks to the financial crime unit at
Cambridgeshire police, the Serious Fraud Office and the stock exchange
before he continues to advocate his current
position.
Mr.
Djanogly: I hear the points made by the hon. Gentleman and
the Minister, but the fact remains that what is filed once a year in
the annual return is a reflection of the register at that moment, not
at any time afterwards. Access should therefore be granted to the
register rather than to what is filed at Companies
House. Secondly, we
are concerned that the Government’s preferred mechanics will
favour larger companies that can go to court and employ a solicitor and
a barrister. The Minister raised that matter. It will be tougher for
the smaller company, which is why we want to increase the period for
going to court from five to 15 days. I found the Minister’s
explanation that she does not want to give people too much time to put
together arguments somewhat strange. Perhaps I did not get that right,
and she might like to elaborate. I did not really understand her
point.
Margaret
Hodge: My point was that companies need to give only 14
days’ notice of an annual meeting. The hon. Gentleman suggests a
longer period for which they could withhold information, during which
time they could pass all sorts of resolutions that might change the
situation and inhibit access to proper information on the company and
its members. That would be a risk if the period allowed were, in the
example that I used, longer than the period for calling an annual
meeting.
Mr.
Djanogly: We would maintain that a small company with
limited resources is unlikely to be able to appoint a solicitor and a
barrister and prepare a court case in five
days. Clause 117 deals
with the refusal of inspection. The Government have given us their idea
of the balancing act that they believe should take place, and if access
to a register of members is refused it will be a serious matter.
However, the clause increases the potency of our argument that
companies should have more time than the five days provided to approach
a court for a non-disclosure order. As I have said, that is
particularly important for small companies. The Minister said that she
will consult with lawyers on the mechanics of how the process is likely
to work. Will she drop hon. Members a line to explain what she will ask
those lawyers? The provision is important and needs much further
consideration. Thirdly,
the provisions would not be difficult to interpret. Companies would
have to consider whether a normal-looking request for member details
harboured a secret, illegal purpose, and courts would have to
determine what was a fit and proper purpose, about which we have had
some debate. An amendment made on Third Reading in the Lords tried to
address our concern that many activists could buy one share each and
keep the company perpetually in court with requests. That amendment,
now clause 116(4), is still open to broad interpretation, and
presumably it would not stop further applications on grounds other than
the similar purpose test. Fourthly, we remain concerned
that the only person who can seek protection is the company, not the
shareholders who are individually at risk. Fifthly, the UK Shareholders
Association, in its briefing to us on 30 May,
said: “Clause
118 creating offences in connection with the obtaining of a copy of a
register or of passing it on also seems unsatisfactory. The definition
of the offence in connection with the passing on of the list would make
it very difficult for anyone to decide whether they were entitled to
pass it on or not. There seems a risk that the courts would feel oblige
to construe the phrase more widely than might be intended. Moreover, we
are not satisfied that all loopholes in connection with the chain of
passing on a copy have been stopped up. It would seem far simpler to
make the offence apply to the ultimate user of the list. The offence
would then be to use information obtained from the register or index
for an improper purpose, the latter having been defined as suggested
above.” What do
we propose to improve the situation? First, the existing provisions
must be tightened up in the ways I have described. Secondly, the only
access should be via the company register and not Companies House.
Thirdly, there may be special circumstances in which the company or an
individual should have the right to approach the DTI and say,
“We are under attack and we need protection.” That should
not be an everyday occurrence, and it should be undertaken only on a
company-by-company basis. However, in such a situation, shareholder
protection could be so important that the register of members should be
made non-public.
Paul
Farrelly: The hon. Gentleman again seriously suggests that
the only portal for access to a share register should be the company
itself. Has he considered that it would damage the economy’s
efficiency? If somebody wishing to take over a company—and
therefore do shareholders some good—could access the share
register only through the company itself, the company would be tipped
off about the takeover in advance.
Mr.
Djanogly: That would not be the case. One would ask for a
copy of the register, and the company would have to provide it. I
return to my basic point that what the hon. Gentleman describes as the
register of members is a point in time: a shareholder might have sold
half or three-quarters of their stake by the time the hon. Gentleman
had got to Companies House and asked to see a copy of the
register.
Paul
Farrelly: Does not the hon. Gentleman agree that a useful
guide is far better than no guide whatever?
Mr.
Djanogly: The accurate guide is the register. The company
maintains it, and the Companies Acts provide for people to access the
register. We should debate the question of more or less access, about
which
I fully accept there are valid points to be made. I maintain that access
should be gained through the register, rather than through an old
record at Companies House.
Today’s debate has shown
that new clauses 2 and 3 could be improved. For instance, they could
provide for the company to circulate documents that shareholders would
normally circulate. Despite the register being closed to inspection,
access to other members could be retained. It was a feature of the
Liberal Democrats’ new clause 22, and the composite approach
mentioned by the hon. Member for Cambridge sounds attractive. It would
address the issue that was quite properly raised by the hon. Member for
Burnley (Kitty Ussher).
Some of the Labour
attacks on new clauses 2 and 3 were a surprise, and hon. Members might
not appreciate where the drafting derives from, so let me explain. A
few years ago, there was growing concern about the abuse of directors
arising from the requirement that their home addresses appear
onthe public register at Companies House.
The Companies (Particulars of Usual Residential Address)
(Confidentiality Orders) Regulations 2002—that is a
mouthful—attempted to provide a remedy, which became clause 723B
of the Companies Act 1985.
The provision, which will be
superseded by that in the Bill, played an important role in advancing
the debate on this issue. It provided that a person could ask the
Secretary of State to make a privacy order if he could show that
revealing his address would create, or would be likely to create, a
serious risk that he or a person living with him would be subject to
violence or intimidation. What is important is that the decision on
privacy was to be an administrative, rather than a court
decision. In
practice, the current system has worked fairly well. The Minister might
wish to put me right on this, but I believe that there have been no
accusations of democracy having been attacked. The current system could
therefore form the basis for similar provisions for shareholders,
possibly with enhanced appeal rights. Of course, new clause 22 provides
for the decision to be taken by shareholders, rather than the DTI. At
this stage, however, I feel that that is a step too far, although it
was certainly important to bring the issue up for discussion.
The Opposition remain of the
opinion that clause 115 does not go far enough and that new clause 2
would be a useful addition to the existing powers. That is why I shall
ask for a Division on the new clause when we reach it at a later stage.
For the moment, however, I shall ask for a Division on amendment No.
29, which,I believe, we shall be able to have today. I beg to
ask leave to withdraw the amendment.
Amendment, by leave,
withdrawn.
Clause 115 ordered to stand
part of the Bill.
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