Clause 12
Company Law Reform Bill [Lords]
10:45 am
I restate that as our position today. As Lord Hodgson said on Third Reading:
“The lack of any requirement for the registration of secretaries will leave those that still exist in limbo, with no official recognition of their status.”—[Official Report, House of Lords, 23 May 2006; Vol. 682, c. 710.]
Lord Sainsbury said that the only time third parties should need to know the information about a secretary is when executing documents. Technically, the Minister may have been right, although practically—particularly for larger companies and for corporate governance purposes—we do not think that he was. That will be the debate on part 12.
On Third Reading in the Lords, Lord Sainsbury addressed the question of secretaries and others signing documents in detail. He said that the Government would consult on four issues. He stated:
“There are four questions that need to be addressed with this group of amendments. First, who should be able to execute documents for a company? Secondly, and related to the first, if private companies appoint a secretary, should that secretary be able to participate in the execution of documents for the company? Thirdly, should the details of any secretary voluntarily appointed by a private company be on the public record? Fourthly, and finally, if private companies appoint a secretary, should the directors be under an express duty, imposed by the Bill, to secure that the secretary is a person who appears to them to have the requisite knowledge and experience to discharge the functions of a secretary?” —[Official Report, House of Lords,23 May 2006; Vol. 682, c. 711.]
Those were fair questions and we looked forward to hearing the response to the results of the consultation. Unfortunately, it seems that the Government decided not to answer those questions or, rather, by coming out with their proposal for authorised signatories, said that they were all answered. We do not think that that is adequate. I know that the Government have been under time pressure during the consultation but20 complicated Government amendments were filed a few days ago and we have not been able to consult on them. So, as far as we are concerned, it has not been a good start to consideration of this clause.
However, it is clear that the Government are moving on from the concept of the company secretary to that of the authorised signatory. We believe that there is room for both. Having made that clear, and on the basis that we want to return to this issue when considering part 12, let me move on to the provisions relating to authorised signatories.
I note the position of the Institute of Chartered Secretaries and Administrators, which put a strong case in its note of 15 June 2006. It said:
“The proposed authorised signatory regime may provide further flexibility to some companies, but this new regime will not suit all private companies. The authorised signatory, as proposed in the draft clauses from the DTI, is a different beast to a secretary and can sign any document on behalf of the company. This contrasts with the secretary’s automatic powers, which beyond their statutory powers, have been established in case law to be limited to signing documents of an administrative nature.”
The Secretary of State made clear on Second Reading that he supports the optional regime, but he and many others may not have realised that all the statutory power of a secretary of a private company has been completely stripped away by the Company Law Reform Bill as drafted. Where the board of a private company wants the secretary to continue in his position post the enactment of the Bill, it will find that all the secretary’s automatic statutory powers under the 1985 Act to certify and execute documents and file returns to Companies House will no longer exist. For any of the 2 million private companies that find their secretary useful and want to continue to employ such a person, there will be the confusing burden of having to set up appropriate authorisations to try to mimic the current statutory powers that are well understood. The new burden will bring complication, not simplification. A secretary remains an officer of the company, so his statutory powers should be clear along with his liabilities.
Should such a company want to appoint a secretary, there is no provision for it to register the appointment at Companies House. Registration is essential, as it provides an easy authorisation check for third parties dealing with the secretary. It is common sense that the automatic powers under the 1985 Act should continue to apply to those secretaries who continue in their position, and it should be possible to register future secretary appointments at Companies House. It is not difficult to amend the Bill to capture the idea that private companies have a choice as to whether to have a secretary, and that the existing powers will apply if they do have one. It will be far more burdensome and confusing for companies if the Bill is left as drafted.
These are important points. In fact, the more I consider the subject, the more I wonder why we need an either/or approach. Why not retain the secretary regime for those companies that have them, which admittedly will be far fewer after the Bill comes into effect, but also put in place an authorised signatory regime?
Having said that, we do not have a problem in principle with the concept of the new authorising signatory regime per se, but given the lack of time—those comments were received in the brief time since the amendments were tabled—I must reserve our right to come back on the detail of the provisions on Report. I look forward to hearing the Minister’s explanation of how the separate register and execution powers will work in practice.