Clause 260

Company Law Reform Bill [Lords] – in a Public Bill Committee on 29th June 2006.

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Particulars of secretaries to be registered: individuals

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch 9:00 am, 29th June 2006

I beg to move amendment No. 198, in clause 260, page 120,line 26, leave out ‘instead of’ and insert ‘in addition to’.

Photo of John Bercow John Bercow Conservative, Buckingham

With this it will be convenient to discuss the following amendments: No. 199, in clause 260, page 120, line 27, leave out

‘or in addition to either or both of them'.

No. 200, in clause 260, page 120, line 38, leave out ‘18’ and insert ‘16’.

No. 201, in clause 260, page 120, line 40, leave out sub-paragraph (ii).

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

The clause relates to the particulars of secretaries that are to be registered, and amendments Nos. 198 and 199 are largely probing amendments designed to obtain clarification on the names to be provided to the registrar. Subsection (2) says that

“For the purposes of this section ‘name’ means a person’s Christian name (or other forename) and surname, except in that in the case of—

(a) a peer, or

(b) an individual usually known by a title, the title may be stated instead of his Christian name (or other forename) and surname or in addition to either or both of them.”

My question is about certainty, more than anything else. If a title is used, should not it be provided in addition to the Christian name or surname, rather than instead of them? That would facilitate due diligence and checking of company secretaries to identify whether they were previously a company secretary or similar officer, and would permit that investigation still to be undertaken even if they had changed their name.

Amendment No. 200 concerns consistency. Under the proposals in the Bill, it is now possible to standardise registration of particulars for names that have not been used for 20 years. That is in subsection (4): if somebody has changed their name or if the name has been disused for 20 years, the previous details need not be provided on the register. However, my question is whether, for the purposes of checking and due diligence, a disused name should still be provided even though it may have been disused for 20 years. Obviously that is a significant  period, but there may still be a need to check for bankruptcy orders or the like—matters that may be relevant in the context of good corporate governance.

I note that if a name is

“changed or disused before the person attained the age of 18” the name need not be provided. Directors can now be appointed at the age of 16, and the amendment would harmonise the age at 16, for the sake of consistency. If, during the two years between the ages of 16 and 18, a person uses a name and is the director of a company that goes bust or suffers some other unfortunate occurrence, but can then disuse their name on reaching 18, that hardly provides for the good corporate governance and due diligence to which I have alluded in relation to the other amendments. My approach is one of transparency and good corporate governance and I am testing why the Bill has been drafted as it has.

Photo of Nick Palmer Nick Palmer PPS (Malcolm Wicks, Minister of State), Department of Trade and Industry

I have just a short point on amendment No. 201. The hon. Gentleman suggested that it might be relevant if a person had committed some sort of fraud 20 years ago. Is it not the case that, in that situation, the period in which such offences could have been mentioned would have expired? We would know the person’s name but we would not know about minor financial offences that they had committed 25 years ago.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I think the hon. Gentleman alludes to the fact that there is a time limit after which offences effectively expire for employment purposes. It is a fair point, but when, for example, there is about to be a flotation or suchlike, questions are often asked as to whether a director or potential director of a listed company has committed any offence in the past. Clearly, in that greater public exposure environment, it would be damaging to a company if that information were to be provided at a later date, once a company was on the market. That is why those due diligence investigations are undertaken and why, in these probing amendments, I am attempting to see whether we will have sufficient clarity for those types of investigations after the introduction of the Bill.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The hon. Gentleman pointed out that these were probing amendments. He made some sensible, arguable points. The approach that we have taken to the provision is largely to maintain the current situation. We could have gone for a different kind of consistency. At this stage, we thought that there was no need to change it.

The approach taken to both directors and secretaries in the early part of the clause is long-standing. It has not caused problems so we decided to leave it as it is. We feel that that is the better approach but do not feel particularly strongly about it.

As far as peers are concerned, this reflects the long-standing arrangements. The right hon. and learned Member for Devizes (Mr. Ancram) is an interesting example, if I may use his name for illustrative purposes. He comes within subsection (2)(b), because Ancram is a courtesy title. His title, as I understand it, is now Lothian. However, his family name has always been Kerr. Everyone knows him by a  particular title, so no one would think it inappropriate for him to use the title by which he is commonly known. That approach is allowed for in subsection (2)(b). It would then be up to him as to which title he chose to be known by, providing that there was nothing misleading in the way in which it was done.

Amendments Nos. 200 and 201 relate to the requirements on former names. The Bill retains the requirement in the current Act only for former names back to the age of 18, rather than the lower age of 16 that applies to directors and authorised signatories.

Our view was that one could go for consistency either with the old Bill or with directors and authorised signatories. There is an argument for either. It is a matter of taking a choice. For secretaries of public companies, the qualification requirements in clause 256 mean that there is little need for a minimum age. I cannot imagine that many of the people achieving that qualification are likely to be 16, so it seems unnecessary to change the arrangements for the age and information about former names.

Section 290 of the Companies Act 1985 requires a former name for a secretary. In that it differs from the rule for directors in section 289 of excluding a former name that has been changed or disused for 20 years or more. We do not see any reason for applying a longer period to secretaries’ former names than to directors’.

Those are broadly the reasons. If the hon. Gentleman feels particularly strongly—I suspect that he does not—that the requirements need to be changed, we will be happy to consider that, but that is the approach we have taken.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I am grateful for the Solicitor-General’s comments. As I said in my opening remarks, these were largely probing amendments, to help us understand the basis on which these approaches had been developed.

The situation for company secretaries is at a less heightened level than that of directors, where there has traditionally been greater sensitivity about the information. Indeed, the information about company secretaries has been less full than the information provided by directors on the public record under section 288 of the 1985 Act. I take on board what the Solicitor-General said about the longstop of 20 years on former names and the approach taken on whether to specify an age of 18 or 16.

As the Solicitor-General helpfully pointed out, there is an issue of consistency on which we might reflect a little further. It is not likely that there will be huge numbers of directors aged 16 and 17, but in this increasingly entrepreneurial world in which young people are rightly encouraged to take a healthy interest in business and perhaps set up their own companies, this might become more important, so some further reflection on that point would be helpful as the Bill proceeds.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I am grateful to the hon. Gentleman. We are certainly happy to reflect on the matter. If he has strong views on it, I am happy for him to come back to me.

I have reflected on another matter that the hon. Gentleman raised in our last sitting. He mentioned his  concerns that people might seek to increase the fee to restrict access to the register of secretaries. I asked for some work to be done on the matter, and it seems that the fee is £2.50 for each hour during which the right of inspection is exercised. The making of that fee is enabled by the Companies (Inspection and Copying of Registers, Indices and Documents) Regulations 1991 and therefore set by the Secretary of State. If somebody wants to go along and have a look at a name it does not cost much, and there is no option to put up the price unnecessarily. That rule will be introduced through regulations and therefore promulgated by the Secretary of State. It would be useful if the registrar made clear the situation on the Companies House website.

I am happy to reflect on the point that the hon. Gentleman just raised, which is a matter of preference. I do not think that it will make much difference, because the work of company secretaries means that they are likely to have to comply with certain requirements. I doubt that they will be 16 years old, because of the nature of the work.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I am grateful for that further clarification, in particular on the point that we discussed about fees, which is helpful in terms of transparency. I am grateful also for the Solicitor-General’s comments on making the information more visibly accessible on the Companies House website. That would be helpful, so that everybody can be clear precisely what the situation is when exercising their rights and that they are not in any way fobbed off or given a false impression. On the basis of his comments, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 260 ordered to stand part of the Bill.

Clause 261 ordered to stand part of the Bill.