Company Law Reform Bill [Lords]
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 LordsI am sure that the hon. Gentleman has read the debatemembers 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. Gentlemans 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 classescompanies such as the one in my example existbut 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,
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Amendment, by leave, withdrawn.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.
Power 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.
Existing 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.
Appointment 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 aint broke, why fix it?
Mr. Djanogly: I tried to explain that, effectively, it is a redundant provision. We do not see it used any moreat 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.
Register 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 companys 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 companys 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
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 issuewe previously discussed the personal details of shareholdersnot 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.
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 lenders 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 Bills 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.
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