James Brokenshire (Hornchurch, Conservative)

I beg to move amendment No. 59, in clause 63, page 25, line 26, after first ‘its', insert

‘profits (if any) or other'.

I shall be brief. Clause 63 tracks section 30(3)(b)(i) of the Companies Act 1985, except for the words

“profits (if any) or other”.

In another place, Lord McKenzie said that he had received advice from officials that the term “income” was sufficient to cover profits. Even though I am a lawyer, I do not wish to promote arcane debates unnecessarily, but there seems to be a difference. I think that there was some doubt in the mind of Lord McKenzie at that stage. In Grand Committee he said that he had doubts and would give the issue more thought. I wonder whether the Minister has given the matter more thought and come to a different conclusion.

Vera Baird (Parliamentary Under-Secretary, Department for Constitutional Affairs; Redcar, Labour)

It is true that the extra words are in the 1985 Act, but where appropriate the Bill uses clearer and more succinct wording. The policy is that the companies to which the clause applies should use all the money they have available in promoting their objects, and it is our considered view—even our reconsidered view—that the word “income” is sufficiently general in the context to cover moneys received on the sale of assets, for instance. Indeed, it is better, because on a sale of, say, land, we would want all the money from the sale to be applied to a company’s charitable or similar purposes, not just the capital profit element.

My noble Friend Lord McKenzie wrote to Lord Hodgson on the subject. A copy of the letter is in the House Library and I will supply one to the hon. Gentleman if he would like. I apologise that that has not been done already. Lord McKenzie said:

“A company’s profit (or loss) for a financial year is the result of deducting expenses and other losses from the income of the company, i.e. it is a net figure. Take for example a profit on disposal of a fixed asset. FRS 3 defines this as ‘...the difference between the net sale proceeds and the net carrying amount, whether carried at historical cost (less any provisions made) or at valuation’. We do not think it is appropriate to restrict the duty to use money to promote the company’s objects to this net figure. The policy is that all the money from the sale should be used to promote the objects of the company”.

James Brokenshire (Hornchurch, Conservative)

I am grateful for the Minister’s clarification and her offer to supply that letter. In light of her comments, I beg to ask leave to withdraw the amendment.