Clause 19

Company Law Reform Bill [Lords] – in a Public Bill Committee at 11:30 am on 20th June 2006.

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Power of Secretary of State to prescribe model articles

Question proposed, That the clause stand part of the Bill.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I understand that new table A model articles and other model articles are to be issued. Will the Minister provide a timetable for consultation on such matters and details of any problems with them that may have arisen to date? Such documents are vital to companies and the operation of their businesses. Is it the Government’s intention to adjust existing articles, table A and so forth, or to give them a thorough overhaul? I note, in that regard, that the language under table A is somewhat dated and it is probably about time that it was given a thorough going over.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

I want to probe a little the idea of model articles. Presumably, it is the state not in legislative mode but in advisory or nanny mode. I want to make it clear that I had properly understood that that is the case because, under subsection (3),

“A company may adopt all or any of the provisions of model articles”,

which makes the idea look very voluntary.

The word “prescribe” is used under subsections (1) and (2), and I want to be clear whether it is intended that pressure is to be put on companies to adopt the model articles or whether the Government envisage sanctions for companies that do not adopt them.  Above all, I protest slightly that we have reached the clause that provides for the model articles without having any notion of what the Government have in mind. That very bad habit is becoming more and more common and, as each year goes by, we come across Bills that provide for the Government subsequently to make regulations, produce guidance documents or, in this case, produce model articles without our having any idea what they have in mind.

After seven years of consultation on the subject, it is reasonable to expect that, by the time the Bill is brought before Parliament, the Government have shown us the colour of their money and explained what the model articles would be. That would enable us in the House of Commons to do our job and see whether there were any difficulties or perversities about the proposals. Even though they are voluntary, presumably they will have a quasi legal force so that, if a company were challenged about the adequacy of its articles and it can point to having adopted the model articles provided by the Secretary of State, that will be a full defence. We do not know whether the model articles will be adequate for the purpose.

Will the Minister explain the status of the model articles? Are they purely advisory? Is there any intention to put pressure on companies to adopt them? Will the Minister explain why we do not have the model articles in front of us? The position is highly unsatisfactory. Can we have an opportunity before we discuss the Bill on Third Reading—at least before it is debated on Report, so that we can consider the matter on the Floor of the House—to know what the Government have in mind for the model articles? After all, surely seven years is long enough for someone to draft them. If the Government had the concept that model articles are required, the onus is on them to show us what they have in mind.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I hate to disappoint Opposition Members, but the articles are out for consultation. Clearly, they have not seen them. The articles are on the Department of Trade and Industry website, as well as in the Library. I suggest that Opposition Members look at them and, if anything worries them, they can ask me about it.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

That is simply not good enough. The Government are not treating Parliament as Parliament ought to be treated. If there are model articles and other documents referred to in the text of the Bill that are germane to proceedings, they should be distributed to Members of Parliament. There are all kinds of information on all kinds of websites across the Government; Members of Parliament cannot be expected simply to trail through every Government website on the off-chance that they will discover something relevant to the Bill. It is up to the Government, who are submitting this draft legislation to us, to ensure that we see the relevant documents.

I have not seen a copy of the model articles; I do not know whether Committee colleagues have been luckier than me. If the Minister has a copy, I should be grateful if she passed it to me.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

The articles may have passed the hon. Gentleman by. I accept that we are all busy and that lots of documents pass over our desks, but  presumably he knows that the articles for private companies were published in draft with the White Paper in March 2005. I presume that he had the chance to look at them then. Approximately a week ago, we placed the model articles for public companies in the Library of the House. They were certainly there for the Committee to consider, and the hon. Gentleman can no doubt access them now.

If the hon. Gentleman wishes, I shall be happy to ensure that all Committee members are sent copies. However, the articles have been published.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

Once again, far from apologising, I want to emphasise my point. The Government are simply not treating Committee members as they should. The Government should take the initiative in ensuring that the Committee sees such documents. The Minister knows perfectly well that the amount of paper produced every day by the Government, including by her own Department, probably equals several editions of the “Encyclopaedia Britannica”.

All kinds of documents are placed in the House. A year ago, I was hardly likely to read a White Paper on the off-chance that a year later I might be selected to sit on a Committee that was considering a Bill relevant to it. If I did that, I would do nothing else for the whole of my life.

The Minister is being not reasonable but bureaucratic in dealing with my point. I hope that she will now become practical. I should be very grateful if she circulated the model articles to me and all other Committee members without further delay.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

We can certainly circulate them to Committee members, but the draft model articles were published 15 months ago. I get a lot of correspondence on issues relating to this Bill. Had he shown an interest in the articles, the hon. Gentleman might have written to me and asked what further steps had been taken. When we published them in draft, it was clear that they were for consultation. Obviously, we want Committee members to have access to the articles so that they can be properly considered as we come to the clauses that we are considering.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

I am grateful to the Minister for giving way yet again. I have made my point. May I ask her to ask her officials today—without delay—to go through the remaining 90-odd per cent. of the Bill and see whether it refers explicitly to any documents that have not been distributed to the Committee? If there are such documents, will the Minister be kind enough to ask her officials to ensure directly that the Committee has sight of them, so that we know that they are relevant to our proceedings?

Photo of Shailesh Vara Shailesh Vara Conservative, North West Cambridgeshire

For the sake of clarity, may I ask the Minister when precisely the consultation period for the articles started? For the record, 15 months ago, at least four Conservative Committee members were not even Members of Parliament. The hon. Member for Solihull takes that number to five. To expect people who are not  even Members of Parliament to start a consultation process on a document is somewhat lame.

I wholeheartedly endorse the point made by my hon. Friend the Member for Grantham and Stamford(Mr. Davies), that the Committee should be informed about any other items intended to be introduced by stealth, to the extent that it is unaware of them.

Photo of Eric Illsley Eric Illsley Labour, Barnsley Central

For the sake of clarity, I should say that interventions have taken up too much time this morning. Members’ interventions should be brief, and Members should clarify whether they are intervening to make interventions or speeches.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

Thank you for that guidance,Mr. Illsley. I am slightly surprised by the interventions made, both last week and this, by the hon. Member for North-West Cambridgeshire. The idea that the model articles, which were published before he was a Member of Parliament and I was the Minister with the relevant responsibility, should suddenly have been republished when he became a Member of Parliament or when I became the Minister with responsibility for these issues, is patently absurd.

Mr. Vararose—

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions) 11:45 am, 20th June 2006

If the hon. Gentleman will give me a chance, I am responding to his previous point. The idea that we are doing anything by stealth is ludicrous. All the parties with which we have engaged since 1998 in taking forward the review of that intricate area of company law have been clear that it was an inclusive and open process.

If the hon. Member for North-West Cambridgeshire failed to see that or to have it drawn to his attention as he prepared for the Committee, I am sorry. I shall ensure that the articles that have been placed in the Library are circulated. On any other matters, it would be sensible probably to draw the Committee’s attention to the location of the relevant papers, rather than to distribute them. That way people will know where on the website or in the Library they can get them. I hope that that will be sufficient for hon. Members—in order to save a few trees.

Photo of Crispin Blunt Crispin Blunt Opposition Whip (Commons)

The Minister and her Department have proceeded with good intentions over a long consultation process, but she needs to differentiate between Members. My hon. Friends behind me, like her hon. Friends behind her, will not have known that they were going to be selected for the Committee until the Selection Committee met. My hon. Friend the Member for Huntingdon will have had some idea that the Bill was coming down the tracks and an opportunity to follow it in detail. However, I ask her to give as much assistance as she can to Back Benchers by identifying and producing documents to make their job as easy as possible. They have not been involved in the process since 1998 like officials in her Department.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

This might help the Committee; I have just been informed that there is a list of the relevant websites at the back of the House of Commons Library note on the Bill. That might be of further assistance to the Committee.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

Briefly, the Minister now seems to be going back on the promise that she gave me a moment ago, for which I was grateful. The Government should give us the documents, not say, “Go and look at websites”, so that we spend our time looking at websites. We need to have the documents. The Government have them, or claimed to have them, and she was gracious enough to say that she would make them available. I take it that that undertaking is still valid. I am still grateful for it and look forward to seeing the documents.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I was simply reflecting the fact that I would like to save a little bit of paper. But if Members feel strongly about having all the bits of papers, rather than references to them, I am happy to help out. I know how much paper we get through, and how much we bin before even looking at it, so it seemed sensible just to provide the relevant references. However, if the Committee so wishes, I shall provide the documents. It is no great problem.

Photo of Shailesh Vara Shailesh Vara Conservative, North West Cambridgeshire

The Minister should speak for herself on the amount of material that is binned. The Opposition take the Bill seriously and certainly will read through all the material that comes our way.

The Minister has repeatedly made the point that there has been a lengthy consultation process, that many organisations have been consulted and that the Bill has been debated in the House of Lords. I point out to her that many of those organisations have put forward conflicting views, and it would not be right for the Committee simply to accept all those views; it is not possible to do so because of the conflicts. It is the purpose of the Committee therefore to try and—

Photo of Shailesh Vara Shailesh Vara Conservative, North West Cambridgeshire

Certainly, Sir. The Committee must ensure that we arrive at a proper decision, so constant reference to previous organisations is perhaps not appropriate.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

After that debate, I cannot remember all the points that have been raised. Opposition Members are not the only people in the Committee taking the Bill seriously. This Government instituted the review of company law; we did it thoroughly, and it is insulting, yet again, for him to suggest that he and his colleagues are the only ones who take the matter seriously.

Of course there are conflicts. We have just spent considerable time discussing one such conflict, to which we shall return—whether there should be regulation and we should insist that every company, be it public or private, have a company secretary. That is a contentious issue, on which the Government have taken a view. No doubt the hon. Gentleman will also  reflect on what is right, rather than what has been requested by a certain group of people lobbying him at a certain time.

I wrote, I hope, to all members of the Committee when welcoming them to the Committee and in that letter I highlighted other information available on the various DTI websites. It might help hon. Members if they return to that information. I asked them to contact me for further information if they so wished and it would be helpful if they did that.

I was asked about the status of the model articles, as I recall. I hope that hon. Members will come back to me if I forget something. I was asked whether the model articles were advisory, I think by the hon. Member for Huntingdon—[Hon. Members: “No.”] Sorry, I should have said the hon. Member for Grantham and Stamford. The model articles are advisory. They are not in any way required; no company is required to adopt them. However, they operate in default, so if a company has not adopted articles, these can be used if the need so arises. It is because of the default provision that they are prescribed; that is why the term “prescribed” is used in the clause.

In discussions that I have had with companies recently, there has been quite a lot of support for the development of the advisory articles. That means that people do not have to reinvent wheels and think through themselves what they have to put into articles. They can look at these articles and see whether they need to adopt them.

I was also asked—I think it was indeed by the hon. Member for Huntingdon this time—whether there was an intention to adjust existing articles. No, it has never been the case that successive Governments have replaced the articles of existing companies. I hope that what I have said deals with the issues that Opposition Members have raised about the clause, that I have convinced them that the Bill makes sense and that we can approve the clause.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I am grateful to my hon. Friend the Member for Grantham and Stamford for initiating the debate, to which several of my hon. Friends have contributed. It has highlighted the importance of the model articles for companies—that is an essential part of what we are doing with the Bill—and the need to consult fully on the matter.

There has been some confusion about when the model articles were put forward in the White Paper and when they were consulted on. I have just seen in a pile of paper that the consultation started on 8 June, so it has not being going on for long. My first point is that the consultation is ongoing. The fact that a White Paper was published, however long ago that was, is unrelated to the fact that the consultation has been going on for only a couple of weeks. On that basis, my hon. Friend the Member for Grantham and Stamford made an important point.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

There is a misunderstanding. There was a consultation on draft articles, which was initiated when we published the White Paper in 2005. We then commenced a further consultation on articles for public companies; the one in 2005 related to private  companies. We commenced a consultation relating to public companies on the articles that we published before the Committee sat. It is those that I have agreed to distribute around the Committee.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

That clarification is helpful.

The second point that I wanted to make is that what was in a White Paper is not necessarily what was consulted on. There may have been changes between the two dates. For that reason as well, it is fair to make the point that we need to have a fresh look at this matter. However, I thank the Minister for her offer to send out the documents and related documents—I think that is what she said—so that what has happened will not happen again and the Committee will be advised in advance. Finally, I would be grateful if she could say when the consultation is likely to end and when the results are likely to be published. I hope that these important model articles will come into play at the same time as the overall provisions of the Bill.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I am informed that the consultation will continue until the end of August.

Question put and agreed to.

Clause 19 ordered to stand part of the Bill.

Clause 20 ordered to stand part of the Bill.