Margaret
Hodge: Of course I recognise that there are some
incredibly talented young people. I wonder whether Mozart would have
claimed his IPR rights at the age of five, or whenever it was that he
first composed
music. There are
considerations, but we view the exceptions as classes rather than
individuals. That is where we differ from the hon. Gentleman. We may
want to make exceptions among classes, hence the power to do so. I gave
the example of a company that is set up to foster some youth activity
and is trading as
such. There is an
oddity, in that in the House of Lords—I am sure that the hon.
Gentleman has read the debate—members of his party were against
anybody under 18 becoming a director. [Hon.
Members: “Under 80.”] Under 80! Anyway, there
is an anomaly in the hon. Gentleman’s position.
One has to take a sensible
decision. The Committee can vote if the hon. Gentleman so wishes, but I
have assured him that we will consider transitional arrangements and
ensure that we do not catch anybody who is currently a director. We
will make some sensible, practical arrangements to deal with them. We
will consider classes—companies such as the one in my example
exist—but not individuals. In that context, this is a sensible
way forward. On the whole, we want those who are under 16 to be putting
their energy, vigour,
initiative and everything else into achieving higher qualifications in
the education system rather than into other
things. Mr.
Djanogly: I thank the Minister for that clarification and
repeat our disagreement with her position. She mentions that exceptions
will be made for classes, but we think that they should be made for
individuals. On that basis, I shall pursue amendment No. 150 instead. I
beg to ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Clause 142 ordered to stand
part of the Bill.
Clause
143Power
to provide for exceptions from minimum age
requirement Question
proposed, That the clause stand part of the
Bill.
Mr.
Djanogly: I have two brief points to make. First, will the
Minister confirm that the clause could be used to cater for individual
circumstances rather than classes of people? I believe that we have
already had an answer to that. Secondly, to what extent will the
Minister be open-minded about granting waivers in respect of classes?
We note the negative resolution procedure, but would a less formal
administrative mechanism be more appropriate, and could such a
mechanism be introduced by
regulation?
Margaret
Hodge: That is an interesting concept, and I have no
objection to considering whether it would be appropriate. However, I
have to say to the hon. Gentleman, no on the individuals, yes on the
classes. Of course we will have full consultation on the regulations
before the power is used.
Question put and agreed
to. Clause 143
ordered to stand part of the Bill.
Clause
144Existing
under-age
directors Amendment
proposed: No. 150, in
clause 144, page 64, line 28, at
end
insert— ‘unless,
before section 142 comes into force, the company has appointed a
natural person over the age of 16 to be a further
director.’.—[Mr.
Djanogly.] Question
put, That the amendment be made:—
The Committee divided:
Ayes 9, Noes
10.
Division
No.
17]
Question
accordingly negatived.
Clause 144 ordered to stand
part of the
Bill.
Clause
145Appointment
of directors of public company to be voted on
individually
Mr.
Djanogly: I beg to move amendment No. 151, in
clause 145, page 64, line 37, leave
out from first ‘made’ to end of line
38. The idea behind
the clause is certainly sound. The bad old practice of grouping
directors together and having them voted through en bloc, normally at
the AGM, is not good corporate governance practice. Votes should be
taken individually on each director. Having separate resolutions also
gives shareholders the chance to ask questions concerning each
director. In an age in
which institutions are quite properly taking more of an interest in
making recommendations based on each director, and often related to the
independence of non-executive directors, single resolutions certainly
make sense. However, I note from the second half of subsection (1) that
the old provision for bloc voting is to remain, subject to the
condition that the company has voted for it. I am surprised that that
provision has been carried over into the Bill. Will the Minister please
provide an example of when that might be
necessary?
Margaret
Hodge: If I may, I shall turn that question back on the
hon. Gentleman. The provision simply takes from section 292 of the 1985
Act. To the best of my knowledge, that provision has not caused any
problems. If he has a good reason for changing it, I shall listen. But
if it ain’t broke, why fix
it?
Mr.
Djanogly: I tried to explain that, effectively, it is a
redundant provision. We do not see it used any more—at least I
have never seen it used. Will the Minister say when it would be used?
Certainly, it goes against all general views on corporate governance.
That made me think that as we reconsider the Companies Bill every 20
years, it might be worth removing the
provision.
Margaret
Hodge: The provision allows flexibility for companies
because the agreement must be unanimous, not by majority. The
counterview is that if we remove that flexibility, regulatory
Government diktat would increase. So we have left it as it
is.
Mr.
Djanogly: I think that I have made my point. On that
basis, I beg to ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
Amendment
made: No. 104, in clause 145
, page 65, line 4, leave out
‘altering’ and insert
‘amending’.—[Margaret
Hodge.] Clause
145, as amended, ordered to stand part of the
Bill. Clause
146 ordered to stand part of the
Bill.
Clause
147Register
of
directors
Mr.
Djanogly: I beg to move amendment No. 270, in
clause 147, page 65, line 18, leave
out ‘to’ and insert ‘, 149
and’.
The
Chairman: With this it will be convenient to discuss the
following: Amendment No. 459, in
clause 147, page 65, line 20, at
end insert ‘,
or the place where its register of members is kept available for
inspection (if not at its registered office), or its principal place of
business (if that is situated in the part of the United Kingdom in
which the company is
registered).’. Amendment
No. 367, in clause 147, page 65, line 33, at end
add— ‘(7) An alternate
director is to be treated as a director for the purposes
of— (a) sections 147 to
149 (register of
directors), (b) section 150
(register of directors’ residential addresses),
and (c) section 152 (duty to
notify registrar of
changes), if he is so appointed
for more than 1
month.’. Government
amendment No.
365 Clause 150 stand
part. Government
amendment No.
366
Mr.
Djanogly: Amendment No. 270 is a technical amendment and
is needed because the register of directors’ residential
addresses required under clause 150 is not open for inspection as
required by subsections (3) to (5). It is therefore designed to delete
the reference to clause
150. Amendment No. 459
came from the Law Society. Whereas a company’s registers of
members and debenture holders may be kept at an address other than its
registered office, its register of directors must be kept at its
registered office. It has been pointed out that it is common for a
private company to employ a single, combined register book containing
all those particulars. If that is maintained by a company’s
professional advisers, the company is obliged to have its registered
office at their address rather than at its head office. We have
previously recommended that the register of directors should be
permitted to be kept at another address, provided that it is within the
jurisdiction in which a company is registered and that notice of the
address is given to the registrar of companies. Clause 212(2) is a
reasonable model and we suggest that clause 147 be amended in line with
it. I note that in
clause 153 it is made clear that the director notification provisions
apply to shadow directors. Unless I have missed the provisions, I
cannot see that the Bill makes specific reference to alternate
directors in that regard. That deserves inclusion, if only
to clear up confusion. The current state of the law is that when a
person appoints someone as their alternate to pitch up at a board
meeting under a company’s articles, he is technically required
to file form 288 notifying Companies House of that fact. That can be
more trouble than it is worth, especially as many people are appointed
as alternates for only one board meeting or on an ad hoc basis. Each
time the alternate is appointed, a form is supposed to be sent to
Companies House, and after each board meeting a further form should be
sent to notify Companies House of the termination of the alternate
status. In practice,
those provisions are so unworkable that they are practised more often
in the breach than in the observance. To clarify the matter we propose
amendment No. 367, which states that if an appointment as alternate is
for less than one month, no forms have to be filed. That would tie in
with what is meant to be a deregulatory Bill. Whether or not
notification is to be made of the appointment of an alternate, will the
Minister advise me whether it needs to be written into the register of
directors? On clause
150 stand part, the question how best to protect the home addresses of
directors has been an important issue—we previously discussed
the personal details of shareholders—not least for directors who
have been targeted for abuse by economic terrorists. Although the
Opposition believe in robust scrutiny in corporate governance and value
transparency, we are particularly concerned that a suitable balance be
struck and that directors in charge of companies engaged in potentially
controversial but lawful activities are protected, as is their right
and our duty. I have been in touch with Lord Sainsbury on the matter
for a number of
years. 1.30
pm Out of
necessity, the approach has evolved over the past few years. Following
the last change in regulations, it is possible for directors to
approach the DTI to request that they can use a service address. For
everyone else, the home address is still to be used. However, the
approach in the Bill has been changed so that directors will have the
presumption of using their service address, provided that they give
details of their home address for a second, private
register. The
Conservative Opposition generally support this approach as a sensible
way forward. However, it is fair to note that a limited number of
concerns have been raised, mainly by lending bodies that are concerned
for the implications relating to abuse by fraudulent people. Indeed, my
noble Friend Lord Hodgson raised those very points in some detail in
Grand Committee. We have received a note from the Finance and Leasing
Association, and it is important to take a balanced approach and to put
its views on the
record: “The
most controversial aspects of the reforms from an FLA perspective are
clauses 217-225 around Confidentiality of Directors’ Home
Addresses. Our position here has differed significantly to the one set
out by opposition
parties”— I am
being very fair
here— “calling for
a right for directors to have their home address kept confidential from
the public record, and for a service address to appear on the public
record instead.
Such a proposal would have
significant consequences for the corporate lending and financing
sectors, by limiting a lender’s ability to verify
directors’ details against the public record.
The details of this are set out
below...We noted concerns raised in the Official Report on
proceedings during Committee Stage of the Bill about the possibility of
disclosure of personal details held by the registrar to
‘bogus’ CRAs.
Like the Minister, we
appreciate these concerns, but would like to take this opportunity to
provide some contextual information that we hope will acknowledge and
explain further the restrictions and safeguards that surround the
Bill’s proposal for access to director information and the
purposes for which this information is used by lenders.
Following a number of high
profile cases, procedures were put in place for directors within high
risk businesses and industries to apply to the Secretary of State to
exclude their home addresses from the public register.
The Bill proposes a less
onerous regime where any director can choose to give a service address,
in addition to their personal home address. The service address will
appear on the public register and a separate restricted register of
protected addresses will be created.
Under the terms of the Bill as
drafted, clause 220(3) allows for the disclosure of the protected
register to CRAs. Further, clause 220(3) will enable the Secretary of
State to make supplementary regulations to specify how data may be
disclosed and used. The incorporation of these provisions followed
discussions between industry stakeholders and DTI.
We understand that disclosure
will be facilitated in a similar way to that adopted under section 114
of the Representation of the People Act (England and Wales) (Amendment)
Regulations 2001 which provides for the sale of the electoral register
to CRAs licensed under the Consumer Credit Act 1974 and registered with
the Office of the Information Commissioner under the Data Protection
Act 1998 as a credit reference agency.
This statutory scheme followed
the recommendations of the Howarth
Report”. No relation to
the hon. Member for Cambridge (David Howarth), I am
sure. David
Howarth (Cambridge) (LD):
Possibly.
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