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Schedule 2

Company Law Reform Bill [Lords] – in a Public Bill Committee at 5:15 pm on 18th July 2006.

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Specified persons, descriptions of disclosures etc for the purposes of section 648

Question proposed, That this schedule be the Second schedule to the Bill.

Photo of Justine Greening Justine Greening Vice-Chair (Youth), Conservative Party

I have a number of points to make about what the long list in schedule 2 will mean in practice. I apologise for the fact that my speech will probably not be the most eloquent that I shall give in the House; it is more a list of queries than anything else. Nevertheless, if the Solicitor-General can give clarification on the schedule’s meaning and on the Government’s intention, that would be helpful in the progress of the Bill towards Report.

Clause 648 provides that change to schedule 2 will be subject to the negative resolution procedure, so the content of the schedule is important. My first question concerns part 1 of the schedule, which is entitled “Specified persons”. The first person mentioned is the Secretary of State, but it might be worth clarifying exactly which Secretary of State is meant. Is it any old Secretary of State, or is it—presumably—the one for the Department which will have responsibility for the legislation?

The second point was raised in the other place and concerns the sixth category of specified persons: the commissioners for Her Majesty’s Revenue and Customs. There is potential for a scenario in which the takeover panel is both gamekeeper and poacher, which would not be desirable, so we need to be careful that people who interact with the panel in the course of deals do not feel compromised by the range of parties to whom the information that they might share might be passed on.

The 10th specified person is “A constable”, which seems slightly ad hoc. I presume that that is a member of a police force, but the point is worth clarifying.

Part 2 of the schedule is entitled “Specified descriptions of disclosures”. It contains a whole range of descriptions that would merit clarification. For example, the description in paragraph 24 is:

“A disclosure for the purpose of enabling or assisting a person appointed by the Treasury to hold an inquiry into matters relating to financial services (including an inquiry under section 15 of the Financial Services and Markets Act 2000)...to exercise his functions.”

It would be helpful to know just how wide ranging such an inquiry might be, because the inquiries covered are not purely those under section 15 of the Financial Services and Markets Act, but potentially others too. How might such an inquiry relate to the Financial Services Authority, which presumably would be the key operator in that area?

Paragraph 29 is about pensions law. Two pensions reform Bills are likely to come through the House in the coming months and years, and one of them will concern the money purchase pension scheme, which might well be provided by external third parties in the financial services arena. We should be careful that parties that might end up bidding to provide that scheme do not feel concerned that if they hand over information to the takeover panel it will be used by the Government to assess any tendering process under the MPPS legislation. I assume that any further pension legislation will be included in the schedule by negative resolution, as is proposed, but I add a word of caution considering that so much fundamental pension reform is about to pass through the House.

Paragraph 31 mentions:

“A disclosure for the purpose of enabling or assisting...the central bank of any country or territory outside the United Kingdom...to exercise its functions.”

That seems incredibly broad. Will the Solicitor-General tell us why there should be a duty to disclose to the central bank of any country or territory and under what circumstances that might happen? Surely the British Government wish us to have restrictions in place and some criteria by which we might assess whether requests for information and documents are appropriate. In light of our previous discussion we need greater specificity from the Government on how paragraph 31 will work in practice.

Paragraph 32 covers a disclosure, which I have mentioned,

“for the purpose of enabling or assisting the Commissioners for Her Majesty’s Revenue and Customs to exercise their functions.”

That might strike terror into the hearts of most companies, making them fear that their dealings with the Revenue will not take place through the gateway to which they have become accustomed. Similarly paragraph 34, on the Office of Fair Trading, might cause some concern to companies dealing with the takeover panel. They might want assurance on the basis on which documents could be passed to such bodies. Of course we fully support those organisations in the carrying out of their duties, but the Bill lacks detail on the basis on which such requests will be made, the extent to which there will be consultation with parties that provide documents to the panel and the time that a company will have to give feedback to the panel before documents are passed on.

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

I am listening with care as the hon. Lady goes through her list. She should not think that there will always be a duty to disclose. The schedule instead provides a right to disclose in certain circumstances, for instance to the central banks, so that the takeover panel can do so if it wishes. We are considering a prohibition on the disclosure of confidential information and the question is whether there should be gateways through which the takeover panel has a right to disclose information.

Photo of Justine Greening Justine Greening Vice-Chair (Youth), Conservative Party

I take on board the hon. and learned Gentleman’s comments. I am seeking a level of certainty and I am concerned about the uncertainty on how the schedule will work in practice. If there is to be not a duty but a potential for documents to be passed between organisations, that may be appropriate, but the Bill lacks clarity on the conditions under which that can happen and a reasonableness test to judge whether requests are reasonable or excessive.

Paragraphs 38 to 41 are on potential disclosure to the Charity Commission and the National Lottery Commission. One again wonders under exactly what circumstances such a disclosure would be necessary and what was in the Government’s mind when they put together the schedule and specifically included those bodies rather than others.

Perhaps one of the more obscure disclosures is provided for in paragraph 45:

“A disclosure for the purpose of enabling or assisting a local weights and measures authority in England and Wales to exercise its functions under section 230(2) of the Enterprise Act 2002”.

That makes one wonder whether a company could be in trouble for submitting details to the takeover panel in feet and inches rather than using the metric system. Again, the measure applies a level of detail to the documents, the parties to whom they may be passed and the reasons for doing so that is really quite obscure. Reading through the schedule, one is left wondering exactly why it is so far-ranging and whether it would not benefit from some tidying up, along with a few more provisions to provide clarity on how information may be exchanged and according to what criteria.

The Minister will be pleased to know that I am reaching a conclusion—I realise that the list has been slightly long. Paragraph 58 provides for a disclosure

“for the purpose of enabling or assisting an overseas regulatory authority”.

That seems to be something of a catch-all disclosure, in relation to which I flag up the concerns that I raised earlier about data protection and freedom of information requests outside our jurisdiction.

We have already talked about paragraph 70, which is:

“A disclosure in pursuance of any Community obligation.”

Again, the range of what could be captured by such a disclosure request seems remarkably broad. I am not sure that it is wise to have such a broad term in the schedule. Finally, from the fundamental to the obscure again, I finish by asking for clarification on paragraph 69, which provides for:

“A disclosure for the purpose of the provision of a summary or collection of information framed in such a way as not to enable the identity of any person to whom the information relates to be ascertained.”

It seems that there are not enough verbs in that. It is not clear to me exactly what it means, so some translation of paragraph 69 into common English would be welcome. In what circumstances would it be used, why and by whom? It would be helpful to know what on earth paragraph 69 would mean in practice.

I have run through a list of questions, as I said I would. Given how important information is to business today, how vital it is that businesses understand where information flows are going, to whom information will be passed on and why, and the fact that trust underpins the takeover panel’s remarkable success in discharging its duties since its inception in the late 1960s, the issue is worth considering carefully and in detail, to ensure that we are not taken down a route of information usage that was not intended.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department 5:30 pm, 18th July 2006

The schedule sets out some of the gateways. The list of the various potential gateways is not exhaustive and can be varied from time to time if circumstances change, as should be expected. The powers in relation to clause 630 to add to, delete from or alter those in the list will ensure that it remains up to date and relevant.

We are creating not a range of duties, but a range of rights, so that the decision rests with the takeover panel in all but one case. Therefore, what we have proposed is, by and large, an ability for the panel to make a number of judgments.

Photo of Justine Greening Justine Greening Vice-Chair (Youth), Conservative Party

My understanding of the previous clause on which we voted is that we have struck out the panel’s ability to authorise such disclosures. I wanted to clarify whether that was correct.

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

That is incorrect. The panel can authorise disclosures, provided there is an appropriate gateway to access that disclosure of information. It has to decide that it wishes to disclose information, and it can then do so.

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

In just a moment. Let me deal with the point first.

The panel might take the view that a particular request is not appropriate, and therefore decide not to disclose. If there is a view that that is improper, that might have to be tested in the courts. However, we are creating an option for the panel, and it will decide whether a request is appropriate, and will choose whether to disclose information.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

Does the Solicitor-General believe that the panel is authorised to put conditions on its release of information, especially the onward release of information? If that is his view, the debate that we just had was largely otiose.

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

The same conditions shall apply as those that related to the takeover panel. The takeover panel was subject to confidentiality restrictions, and it will be incumbent on those who receive the information to observe the same restrictions, subject to any obligation that they might have in law to pass that information to somebody else. For example, the pensions regulator, to whom I referred earlier, might have an obligation in respect of information about fraud and therefore to a subsequent gateway, although it might not be described in those terms in the legislation.

Subsection (2) states that the panel must not further disclose information, so the information is tagged to that effect wherever it goes. That is subject to the caveat that the body to which it is disclosed might be subject to an obligation, and that obligation might arise in law. The information is safeguarded all the way through the process. I hope that everybody accepts that, with those safeguards, the information is adequately protected.

On the points raised by the hon. Member for Putney (Justine Greening)—

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

I am trying to deal with the point made by the hon. Member for Putney, so unless it is on that particular issue—

Photo of David Jones David Jones Conservative, Clwyd West

I am grateful. The Solicitor-General has referred to a request for a disclosure. Does he anticipate that, in practice, a disclosure will invariably be made in response to a request, or can he foresee circumstances in which the panel may make a disclosure to a relevant body of its own volition?

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

The panel may well be made aware of circumstances—for example, when an offence has been committed—in relation to which it takes the view that it has a moral obligation to disclose further. It might be more than a moral obligation in certain circumstances, so it could decide to pass information to another agency of its own volition, but I anticipate that any disclosure of information is more likely to be the result of a request. To some extent I am guessing when I say that, in most cases, it will be possible for the request to be refused on the basis that the information is confidential. Therefore, if a body asks for information about a bid or transaction, the panel is likely to say no because the information is confidential. However, we want to provide the opportunity—the gateway—to get around the confidentiality in cases in which the panel takes the view that it is important that that should happen, or in which it has an obligation to ensure that that happens. We are being quite restrictive in the various gateways available.

The hon. Member for Putney described a list of potential gateways, and I shall not go through all of them. I shall deal with one of them at a bit more length, but I think that she is seeking an assurance. Are we creating an obligation to disclose information to the organisations—the answer in most cases will be no—or are we creating a right to do so if the panel chooses? In that case, whatever safeguards exist on the takeover panel will continue to exist. That is by and large the case.

The hon. Lady raised the issue of weights and measures. It appears a little odd on the face of it, but weights and measures is the old-fashioned but still legally correct term for consumer protection departments in local authorities. They began as people who checked for short weight in particular products, and as a result, archaic lawyers apparently use the phrase to refer to local consumer protection departments. Given that lawyers continue to be archaic for long periods, I am afraid that the description will continue.

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

Will the Minister enlighten the Committee as to why the takeover panel should want to pass on documents to local authorities?

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

Rather than saying that it is likely to want to do anything, we are saying to the panel that if it feels that that is appropriate, the gateway will enable it to do so. It is not for us to speculate on the circumstances. If I did, I would speculate that the panel might become aware of a particular company’s approach that ought to be dealt with by a consumer protection department, and might feel that it was of such importance that it should be passed on. I do not know. We need to examine what potential gateways the takeover panel might wish to have and ensure that, if appropriate, it has those gateways. If it chooses never to use them, that would be its decision.

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

No, it is not. It is ensuring that we trust the takeover panel. It is important that we preserve its ability to set its own rules, procedures and obligations, preserve confidentiality and give it  gateways to provide access to information for certain organisations where that is appropriate and the panel chooses to do so.

Question accordingly agreed to.

Schedule 2 agreed to.

Clause 649 ordered to stand part of the Bill.