Clause 525
Company Law Reform Bill [Lords]
5:15 pm

Justine Greening (Putney, Conservative)

I beg to move amendment No. 371, in clause 525, page 253, line 30, leave out ‘negative’ and insert ‘affirmative’.

Eric Illsley (Barnsley Central, Labour)

With this it will be convenient to discuss amendment No. 372, in clause 528, page 255, line 2, leave out ‘negative’ and insert ‘affirmative’.

Justine Greening (Putney, Conservative)

The amendments would ensure that future changes in regulations are subject to the affirmative rather than the negative procedure. They affect two clauses. First, clause 525 provides for the terms of a liability limitation agreement and specifically for the Secretary of State’s powers going forward. It says:

“The Secretary of State may by regulations—

(a) require liability limitation agreements to contain specified provisions or provisions of a specified description;

(b) prohibit liability limitation agreements from containing specified provisions or provisions of a specified description.”

Given that the legislation is new, we should ensure that as it beds in, the House has ample opportunity to debate any changes. It remains to be seen exactly how the liability limitation agreements will work in practice, and to give new regulations and powers to the Secretary of State via the negative procedure is not that helpful.

It would give the House much more comfort if we knew that we could fully debate any changes to that aspect of the law. There has been some debate outside the House about the new concept of a limited liability agreement, and it would reassure the business community if we could debate any contentious changes within the House.

Secondly, clause 528 is concerned with a company’s disclosure that it has entered into a limited liability agreement. It relates to amendment No. 372, and any change should also be subject to the affirmative resolution. The provision is important and welcome, but we must be careful to ensure that it is fully debated, because it is fundamental to the relationship between company directors and the auditors that they employ to help audit their accounts.

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

The power in clause 525 that the hon. Lady has described was introduced on Report in another place as part of a series of amendments to meet concerns expressed about the original wording. The Opposition warmly welcomed the amendments, and included special mention of the new power, but no one proposed that it should be subject to the affirmative procedure. Clause 525 was disclosed to the Delegated Powers and Regulatory Reform Committee, and it, too, did not suggest the affirmative procedure.

Clause 528 is altogether simpler. It provides that a company with a liability limitation agreement with its auditor must disclose it in a way specified by regulations. The regulations will specify exactly what  information must be disclosed and whether it should appear in the accounts, in the directors’ report or elsewhere.

The chapter sets out clearly all the important features of the change in the law on auditors’ liability, and the two powers are available only for filling in certain details. Again, the power in clause 521, which was included in the Bill on its introduction, was included in the memorandum to the Delegated Powers and Regulatory Reform Committee in another place. The Committee saw no problem with the negative procedure, and I should think not, bearing in mind the scale of the matter and the need to apply parliamentary time to rather more major things. I invite the hon. Lady to consider that there is no need for the amendment.

Justine Greening (Putney, Conservative)

That is a helpful clarification. I take on board the Minister’s comments, but just because other people have not raised the issue does not indicate that it is not an issue. However, I accept her comments regarding the level of other people’s assurance in other places. I beg to ask leave to withdraw the amendment.