Clause 12 - Application of ``fit and proper'' test to companies etc.
Vehicles (Crime) Bill
8:30 pm
Mr Michael Fabricant (Lichfield, Conservative)
I have a couple of technical queries about clause 12, the general principle of which there can be no argument against. The clause deals with the definition of who and who is not a fit and proper person to carry on a business. Subsection (1) deals with a limited company, while subsection (2) deals with a limited liability partnership.
Mrs Anne McIntosh (Vale of York, Conservative)
Does it not seem extraordinary that clause 11 should be taken out of context with clause 4?
Mrs Anne McIntosh (Vale of York, Conservative)
I am most grateful, Mr. O'Brien. As the words are ``fit and proper person'', we should have considered clause 12 and clause 4 together.
Mr Michael Fabricant (Lichfield, Conservative)
I listen to what my learned and honourable Friend from the Vale of York says. No doubt she will be thinking of the North Yorkshire County Council Act 1991, to which we referred earlier, which deals with the keeping of a register. In that respect, I fully agree with her.
Mr Charles Clarke (Minister of State, Home Office; Norwich South, Labour)
Is the hon. Gentleman prepared to give way to the hon. Member for Vale of York to allow her to explain the precise nature of the North Yorkshire Act for the benefit of the Committee? He has referred to it several times, but I am sure that his hon. Friend would be prepared to clarify the matter.
Mr Bill O'Brien (Normanton, Labour)
Order. The hon. Lady may be prepared to do so, but I am not prepared to allow it.
Mr Michael Fabricant (Lichfield, Conservative)
In clause 12 (1) it is proposed that
a local authority shall be satisfied that a company is not a fit and proper person to carry on business as a motor salvage operator if they are satisfied that any director of the company is not a fit and proper person to carry on such a business
Earlier, we skirted the issue of directors acting as a front for an illegal business. I recall that the Minister said in effect that the buck had to stop somewhere and that in the Companies Act, it stopped with the directors of a company. I wonder whether clause 12 is limited in its effectiveness simply by the reference to directors of a company. Under the terms of the Companies Act, a director of a company is not just someone who is registered as such with Companies House, but anyone else who is accustomed to act for them. Nevertheless, although that is a tight definition in law, it is difficult to prove. Restricting the provisions of clause 12(1) to the directors of a company makes the lives of police officers particularly difficult.
Mrs Anne McIntosh (Vale of York, Conservative)
Assuming that I can offer my services to my hon. Friend the Member for Lichfield, would he be disposed to put the question to the Minister rather than to the Committee?
Mr Michael Fabricant (Lichfield, Conservative)
Yes. While I am addressing the Committee as a whole, I am asking the Minister for a specific answer. Do the Minister and other members of the Committee agree that restricting the criterion to directors of the company makes the job of police officers and the authority operating the register more difficult? I have said that I accept that in company law any director is a director, not simply those who are registered with Companies House. It is difficult to prove that someone is a director in that sense, unless there is evidence that directors registered with Companies House are acting under instruction from people who are not registered as directors. Why is the clause limited to directors? Should it not be extended to include management and staff in general? We have not chosen to table an amendment, because I suspect that the Minister might have a reasonable answer to this question, but he owes it to the Committee to tell us.
My second point is about the reference in 12(2) to ``members of the partnership''. Why is the clause restricted to that of a limited liability partnership? There are not many of these and there are far more partnerships. Is the Minister saying that partnerships are not included because members of them are individuals and therefore not protected by law and would be prosecuted anyway? Or is this an omission? Most partnerships are not limited liability partnerships. My question to the Minister is simply this. Why does the Bill specifically mention a limited liability partnership and not partnerships in general?
My third and final point is that the criterion refers not to directors, because there are no directors of a partnership whether it is a limited liability partnership or a general partnership, but generally to the members of the partnership. However, to be a member of a partnership, one must have signed a partnership agreement or, if my memory serves me well—I read law some 30 years ago, so this may well be out of date—one must be understood to be a member of a partnership under the terms of the Partnership Act 1890. There may have been subsequent legislation.
Again I seek clarification. Just as in clause 12(1) the reference to ``any director'' unnecessarily limits the ambit of the clause—a clause that I welcome—surely the reference to ``any member of the partnership'' could exclude other influential people in the limited liability partnership. I say limited liability partnership because general partnerships are not mentioned in subsection (2). Not mentioning employees of the company could exclude them, even though they may have considerable influence over the partners. Again, what happens in the case of a front company the directors or partners of which are put up and do not know that they are committing an offence? The people lower down in the structure of the organisation are not covered by the clause. An organisation under inspection might well not be a fit and proper organisation to be registered and yet it would not come within the ambit of the Bill because the Bill is focused too tightly on the people at the top, while people lower down in the organisational structure may have the real power.
Mr John Bercow (Buckingham, Conservative)
The fit and proper test is entirely sensible. I certainly do not cavil at it. That is the main reason why my hon. Friends and I have not proposed any amendment to the clause. However, before we give our assent to it, it is entirely reasonable to raise legitimate concerns. I am happy to concede that if my hon. Friend had been around for the first few sittings of the Committee and had been engaged in productive speculation about the Bill's contents rather than the unproductive and painful experience of being bitten by a spider he might have wanted to table an amendment. However, that opportunity did not arise for him and he has to make do with my genuine and earnest, albeit pedestrian efforts to amend the Bill.
My concern here is not with the principle of the fit and proper test but with the issue of transparency. Transparency is something of a buzz word in our politics.
Mr John Bercow (Buckingham, Conservative)
I am sure that the Minister is making a frightfully clever point, but it eludes me.
Mr John Bercow (Buckingham, Conservative)
As my hon. Friend the Member for Mid-Norfolk wittily observes, it is not sufficiently transparent. My concern is with transparency. I ask the Minister to respond to this fairly straightforward challenge. Will the company that is refused registration or re-registration, or has its registration cancelled in the course of a financial year, be informed that one unfit and improper director or member of the partnership is preventing the registration from being continued? Will the applicant or registered operator be told exactly which director or member of the partnership was in such poor odour as to cause the business to fail to continue to be on the register? In other words, will it be done in a hole-and-corner fashion or are we to assume that where registration is not approved, those making the judgment of unfitness and impropriety will fully communicate the facts to the relevant operator? That is of the essence, so will the Minister clarify that straightforward point?
Mr Charles Clarke (Minister of State, Home Office; Norwich South, Labour)
To deal with the last point first, under clause 5(2)(b):
The local authority shall serve a notice on the person concerned stating... the reasons for it.
Those reasons offer the transparency that the hon. Gentleman quite reasonably seeks.
I draw the attention of the hon. Member for Lichfield to clause 1(1):
Any person who carries on business as a motor salvage operator in the area of a local authority without being registered for that area by the authority shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 5 on the standard scale.
That deals with sole traders and partners other than limited liability partners— individuals carrying on business in the specified way. As the hon. Gentleman appreciates, the provisions need to be wider to cover companies and limited liability partnerships. That takes us to clause 12(1) and (2), which demonstrate how that is to be done. We specify limited liability partnerships here because non-limited liability and ordinary partnerships are covered by clause 1(1).
The hon. Member for Lichfield's further two points amount to the same question—whether anyone other than the director or partners can play a significant role and should therefore be identified—and we debated it earlier in our proceedings. The legal responsibility of directors or partners is clear: it is absolute, and it remains so, however pernicious the influence acting on them. If the police were aware of such an influence and that blackmail or other illegal activities were taking place, further criminal offices could be considered. It would not be right, however, to specify in the Bill the process for identifying pernicious influences; it is better to say that responsibility lies with the organisation, its directors or partners.
An alternative would be to include a wider range of people, principally employees or business associates of the organisation. We could do that, but as I said earlier, it would amount to using a sledgehammer to crack a nut and could undermine the fundamental principle that directors and limited liability partners are responsible. Those are the key issues, and I hope that the Committee will accept the clause.
Question put and agreed to.
Clause 12 ordered to stand part of the Bill.