4.3 p.m.
I beg to move,
The order will, if approved, remove most of the differences which exist at present between company law in Northern Ireland and in England and Wales. I should acid that I intend no disrespect to the Principality if I omit it from future references in my speech. These differences have arisen for various reasons. Some have arisen through a deliberate decision that it should be so. Others—the majority—exist simply because of changes in English law which have taken place since the most recent substantive Northern Ireland enactment, the Companies (Northern Ireland) Act 1960. There is, of course, no constitutional reason why differences should not continue to exist if these are considered to be in the best interests of Northern Ireland and—a reservation which is becoming increasingly important—they meet EEC requirements in this field. We have therefore approached the question of change with an open mind, and there has been extensive public consultation on the proposals prior to the draft being laid. It is important to emphasise, nevertheless, the strong practical arguments in favour of uniformity in this field—arguments which do not depend on whether we are in a devolved or a direct-rule situation. Northern Ireland companies operate within the same economic and financial system as do companies in the rest of the United Kingdom, as do their shareholders and creditors. There are no commercial barriers, and it would seem good sense to have the same regulatory system for companies in Northern Ireland and Great Britain unless there are special circumstances clearly justifying separate arrangements. It is significant that this is how the Murray Committee on company law, appointed by the Stormont Government in 1969 but not reporting until 1974, saw the situation. The Committee recommended a general policy of parity with English law, subject to certain reservations in the majority report to which I shall refer. Although much water has passed under the bridge since the Committee completed its work. I do not think it out of place today to pay tribute to Mr. Justice Murray and his colleagues for the work which they undertook. They can take some satisfaction that their report was influential in the decision to bring forward this legislation. I am conscious that much of the order is of a technical nature, and I doubt that hon. Members would thank me for dwelling at length on all the changes it makes in Northern Ireland law. It may be helpful, however, if I refer, first, to certain minor differences compared with English law which would remain. For example, in England a liquidator is required to obtain the sanction of the court or of the committee of inspection to the appointment of a solicitor to assist him in the performance of his duties, whereas in Northern Ireland no such approval is necessary. It is proposed to retain this distinction. A further example is Northern Ireland's more flexible approach to the provision of a remedy in cases of oppression of minorities—and I mean oppression of minorities in shareholders, creditors and so forth. In such cases in Northern Ireland, the burden of proof required to obtain an appropriate remedy is less onerous than it is in England. I draw particular attention to the provisions for a Northern Ireland insolvency service for company liquidations. The Murray Report referred to the lack of such a service asThat the draft Companies (Northern Ireland) Order 1978, which was laid before this House on 6th June, be approved.
The order will remedy this deficiency by providing for the appointment of an official assignee for company liquidations with duties and obligations broadly similar to those of the official receiver in England. The official assignee will be appointed by the Department of Commerce and will act under its authority, but he will also be an officer of the court. For the first time, Northern Ireland will have a governmental authority, charged with statutory responsibility for the oversight of the proper conduct of compulsory liquidations in the interests of the creditors and public, who will be available to act if a liquidator is not forthcoming in response to, or in the absence of, the usual commercial incentives. There are some minor differences compared with the English system in the detailed provisions for the new service, which is why I mention it in this part of my speech. but the effect is virtually the same. As I said earlier, there have been extensive public consultations in Northern Ireland on the proposals in the draft order, and I take this opportunity to thank the organisations, companies, individuals and Members of Parliament who have made their views known to me or to the Department of Commerce during this period. There is no doubt that there is overwhelming support for most of the provisions of the draft order, but it is also the case that considerable concern has been expressed by, and on behalf of, private limited companies which would be required under the order to make specified information about their accounts available for public inspection. This would include information about the company's balance sheet and profit and loss account, the chairman's remuneration, remuneration of directors and of staff above a specified salary limit, and contributions to charities and political parties. In other words, we should have the position which has obtained in England since 1967. The Murray Committee was clear that the main disclosure provisions should be adopted in Northern Ireland, but the majority report hesitated about the wisdom of doing this while the Province continued to be disturbed. The representations received by my Department have stressed various aspects of this concern. Information about profitable businesses and the remuneration of individual business men might tempt terrorists into taking action against the companies or individuals concerned. Companies which are struggling financially may become a prey to take-over or to being forced out of business. There would be an unfair trading advantage for businesses—shops, in particular—which were branches of large organisations and did not have to divulge separate accounts. Companies in the Irish Republic might be put at a com- petitive advantage in some cases if the Republic decided to allow more limited disclosures. I have also received representations which reject such arguments. The Northern Ireland Committee of the Irish Congress of Trades Unions has reminded me of the positive arguments in favour of disclosure which led to our decision to change the law in England, and has questioned whether the situation in Northern Ireland really justifies a continued difference in treatment. I must tell hon. Members that I share these doubts to a considerable extent. I do not believe that the disclosure provisions would be generally damaging to industry and commerce in Northern Ireland. Indeed, I hope that they would make a positive contribution to the task of building a healthy expanding economy, which is one of the top priorities of my right hon. Friend the Secretary of State. At this point, I should, perhaps, correct one or two widely held misconceptions. Northern Ireland does not have proportionately more private companies than Great Britain. At the last count, 96·9 per cent. of companies in Northern Ireland were private companies, as compared with 97·5 per cent. in Great Britain. Northern Ireland does not have relatively more small companies. The number of businesses in Northern Ireland with fewer than 50 workers is 93·2 per cent. compared with 93·4 per cent. in Great Britain. The total employment provided in Northern Ireland by companies with less than 50 workers each is about 35 per cent. of total employment, compared with 36 per cent. in Great Britain. I am nevertheless sensitive to the importance of maintaining the morale and dedication of the business community in Northern Ireland which, with the magnificent co-operation of the working people of Northern Ireland, has kept the wheels of industry and commerce turning at an undiminished rate throughout the years of trouble. There is no doubt that some business men are worried about the possible effects of disclosure in the short term; and, whatever I or others may think about this, it is part of the facts of life in Northern Ireland. It has been decided, therefore, that, while the provisions relating to disclosure have been retained in the draft order, the Department will not seek to implement the requirements for private companies until the disclosure provisions of the fourth EEC directive have to be met, and my information is that this will not be before 1982."one of the most serious defects now existing in the field of company law in Northern Ireland."
Does the right hon. Gentleman mean that limitation absolutely? By that I mean, supposing that the EEC requirements should not, for whatever reason, come into force at all, surely he is not meaning to say that the Government and a successor Government would regard themselves as bound not to implement these provisions at all.
No. All my consultations with business people in Northern Ireland suggest that they are with the order 100 per cent. Their particular difficulty, as the Murray Committee said, relates to bringing it in while the disturbed situation continues. As I understand it, the EEC directive will not come before 1982. I assume that at that point, whatever happens to the directive, we shall be able to review any new circumstances, including any proposal for changes in the English law which obtain at that time.
I am obliged to the right hon. Gentleman for giving way again. In fact, then, he means that this aspect of the order will not be implemented until the earlier of two events—either the EEC requirement or general agreement that circumstances in Northern Ireland which made its implementation at the moment undesirable had ceased.
That is exactly the situation. I do not intend to bring this forward until the EEC obligations are with us. At that moment, we can review the situation again. That would happen before I bring in these disclosure provisions.
I do not think that the right hon. Gentleman has quite met the point of the right hon. Member for Down, South (Mr. Powell). If the security situation in the Province should improve before 1982 or the date when the directive becomes operable, will the articles in the order which he is not proposing to activate then be activated?
I assume that if I am under continual pressure to activate them—I should have to consider the opinion of the business fraternity in Northern Ireland—that would be a different situation. However, I have listened carefully to what many people have said. I have had consultations. We seem in Northern Ireland to do a lot of consulting. I have listened to them and I believe that this is the way of taking the business fraternity with us. We could not bulldoze through an order like this over their heads. This is one way of bringing them with us.
As the right hon. Gentleman said, one of two things has to happen. If there is a change of view in Northern Ireland, I shall respect it. But if the EEC directive comes along, unfortunately—depending on how one looks at it—we shall be bound by it at that time. Representations received on other aspects of the draft order have been relatively few but they have been considered by the Department with great care. In some cases it is possible to take care of the point raised without amending the order. To take one example, the Jenkins Committee on company law recommended that, on the registration of notices of satisfaction of a mortgage or charge on company property, these should be signed by both the mortgagee and the mortgagor. This recommendation has not yet been implemented in England and, although it was suggested that it should be, I was reluctant to proceed on this matter in advance. However, the order provides that this recommendation could be implemented by Statutory Instrument without delay if it were decided to follow the Jenkins Committee's recommendations in Great Britain. I have not been persuaded that any of the points raised during the consultations justified a positive amendment to the draft order as originally published, bearing in mind my starting point that there should be very good grounds for departing from uniformity. On the other hand, this bringing together and updating of Northern Ireland company law in line with that in the rest of the United Kingdom should be of great assistance to legal practitioners and accountants who at present must grapple with the company law codes presently existing in each jurisdiction. In Northern Ireland terms, the law will be brought within two enactments, the 1960 Act and the present order. This simplification, both internally in Northern Ireland and in relation to English law, will also greatly simplify adaptations to take into account future changes in English and Community law. I commend the draft order to the House.4.16 p.m.
I wish at the outset to extend a general welcome to this measure. I want also to express warm appreciation of the tone and spirit of the Minister's speech and of the willingness that he has shown to meet all of us in his consultations over the past few months. This proposal radically to alter company law in Northern Ireland has proven highly contentious and, as the Minister said, has generated considerable debate among those most directly concerned in the Province. In contrast to common experience of such matters of registration, I understand that in the course of consideration of this order a number of submissions were made to the Department, the vast majority of which were unfavourable.
The opponents of the order have not lacked support from one or two people in public life in Northern Ireland, who seem ever ready to jump on the band wagon of public fear and misgiving for their own personal or party purposes. For example, one noble Lord who sits in another place recently declared his intention to kill the order. I do not know to what degree he impressed or reassured those in the business community in Northern Ireland who are genuinely perturbed by some of these provisions, but his promises—one might regard them perhaps as threats—do not appear to have been backed by positive action. His success has been measured in a few column inches in the local Press. It is the duty of responsible leaders of opinion in the Province to articulate the fears and anxieties of those they represent, but our duty extends beyond that. The willingness which some display simply to pander to fear is not responsibility and is a poor substitute for real leadership. In determining our attitude to this proposal, we have had regard to opinion in Northern Ireland and have engaged in lengthy consultations with representatives of the business community there. In addition, we have been guided by our repeatedly declared attitude to the legislation which seeks to bring Northern Ireland into line with Great Britain. In our submission to the Minister on 7th April, we said:In this respect, I have been greatly interested in the view of the Murray Committee. Paragraph 13 of its report said:"As a matter of general principle we have sought parity between Northern Ireland and the rest of the United Kingdom; and would be prepared to depart from that position only when, in particular instances, regional differences or other such considerations render parity unrealistic or unsuitable."
Thus, the view of the Murray Committee concurs with mine and that of my colleagues. Whether on the question of company law or any other, the onus should be on those who seek to retain differences in Northern Ireland to prove that those differences are justified. I am bound to say that none of the arguments we have heard from those opposed to the harmonisation of our company law has persuaded us to depart from the principle of parity. I do not propose to rehearse all the arguments advanced to us, but for the record I would mention only two. We were rather surprised to hear the view expressed in some quarters that one effect of the order would be to place Northern Ireland businesses at an unfair disadvantage and to heighten competition with businesses in the Irish Republic. The Minister touched on this and mentioned that the point had been made to him. I wonder whether he might want to comment further when he winds up the debate and to give us his view as to the validity of that argument. Certainly my view would be that anything which encourages competition and thus greater effort and efficiency is to be welcomed. The second argument put to us was that the structure of business in Northern Ireland is different from that in Great Britain and that businesses in the Province are smaller and accordingly more vulnerable to take-over and to commercial damage should their affairs become widely known. The Minister confirmed that the structure of business in the Province does not differ greatly from the structure of business in Great Britain. I mention these two arguments at this stage because they have been widely canvassed during the public debate on these proposals, and it is clearly desirable that people should know what weight those arguments carry. We are grateful to the Minister for the information he has given on those two matters and I hope that he will feel that he can elaborate still further in his winding-up speech. The real opposition to the order has very little to do with competition and the structure of business and everything to do with the proposed provisions for the disclosure of reports and accounts. As we heard from the right hon. Gentleman, this was an area of concern to the members of the Murray Committee. Then, as now, the fear was expressed that public disclosure of accounts would make various businesses instant terrorist targets and place directors and others at great personal risk. So, while endorsing the parity principle, the Murray Committee urged the Government to postpone the implementation of the disclosure provisions until more settled conditions were restored to the Province. The CBI and others have taken the view that the Murray Committee's recommendation holds good in view of the continuing upheaval and unrest. In our submission to the Minister we said:"The law here (that is, in Northern Ireland) should not differ from the law in Great Britain unless there is good ground or reason for making or leaving it different. To put the matter another way, we feel that the onus of proof should he on the person who asserts that the law here on any given point should be different from the law in Great Britain and, by the same reasoning, that the existing differences in our law should be examined with a view to seeing whether there is a case for retaining those differences."
We went on to say:"Knowing as we do the genuine fears which exist amongst the business community in Northern Ireland, we have considered sympathetically the objections raised to the proposal on the grounds of security."
In drafting that submission we could not have hoped for a better response than that given by the right hon. Gentleman this afternoon. Those who lobbied and counselled the Government on this matter will undoubtedly be reassured by the announcement he made. These are matters on which many of the right hon. Gentleman's colleagues are known to hold strong views. It must be acknowledged that he has shown great willingness to be both accommodating and sympathetic in this matter. I am sure I echo the sentiments of all concerned in expressing the hope that the delay announced may prove to be of a temporary nature, and that events in Northern Ireland may soon contribute to much greater confidence and permit the early implementation of the provisions of the order. If we have to wait for that condition, I hope that we shall not have to wait until 1982. When we come to that year I hope that meddlesome EEC directives will be a thing of the past and, for that matter, the EEC itself. The Murray Committee spoke of the close trading and commercial links between Northern Ireland and the rest of the United Kingdom, and rightly saw the parity principle as being consistent with the economic realities of life in the 1970s and beyond, which brings me to my final point. Apart from those I have already listed, the opponents of this proposal employed one other, seemingly convincing, argument. A new companies Bill for Great Britain is expected to be published before the end of the year, and it was suggested that the proposed changes in Northern Ireland company law would soon be superfluous and in need of updating. It will come as no surprise to hon. Members that my colleagues and I found the alternative argument much more attractive. If one uniform law is established, the task of amending and updating the law in future will be that much more simple and straightforward. That is to say, we support these proposals with the resultant harmonisation of the law in Great Britain, and we assume that in seeking to amend the law in future the Government will be able to introduce United Kingdom legislation, thus removing the need for separate legislation for Northern Ireland."Whether or not the fear has substance, the Government will clearly want to have regard to the fact that fear exists, and do all in its power to give reassurance where it is needed. To that end the Government might consider postponing the implementation of those sections of the draft order which provide for the publication of reports and accounts. Certainly if this could be done without prejudice to the purpose and intent of the overall proposal, the Government would have gone some considerable way towards meeting criticisms which have been made."
4.27 p.m.
It is with some hesitation that I enter into discussion on a subject concerning the Province. I accept the case made by the hon. Member for Antrim, South (Mr. Molyneaux) that the Province should have the same laws as England unless there is good reason for it not to. The order will end the equivalent in Northern Ireland of the old exempt private limited company which existed in the United Kingdom until 1967 and was, I believe mistakenly, abolished in that year.
The Minister said in introducing the order that it was his intention not to implement the disclosure requirements until the EEC fourth directive required it, and he mentioned 1982 as being his approximate idea of when that might be. The fourth directive, as I understand it, will provide the opportunity for the Government to make throughout the United Kingdom similar exemptions for small private family businesses to those which now exist in Northern Ireland. Therefore, the Government are asking the House to pass an order which will give power to the Minister to abolish in Northern Ireland a particular status when the whole trend of public opinion throughout the Common Market is moving in the reverse direction towards restoring the status of the exempt private limited company, or the proprietary company which used to exist. That is why the fourth directive makes the provision that there should be the power for the Government of the United Kingdom or any other member country to make these exemptions. It is interesting that public opinion has moved in such a way as to produce a recognition in this House of the importance of the smaller business and the contribution that it makes. I do not believe, after a re-reading of the Jenkins Report, which led to the abolition of the exempt private company, that any Government in this country would today accept that report as an adequate case for making the changes in the law then made. It certainly does not provide an adequate case for making those changes in Northern Ireland. The Jenkins Report did not think that there was any substance in the argument that a serious administrative burden would be placed upon exempt companies. I accept that a serious administrative burden is not being placed upon them. But the fact is that businesses in any part of the United Kingdom are today being suffocated by the amount of controls and regulations with which they have to comply. It may be possible to justify any single one of these controls, regulations and requirements, but taken together they are suffocating enterprise and initiative. I have to tell the Minister, who has a special interest in seeing a strong and vigorous economy in Northern Ireland, that this move is placing one more unnecessary burden upon companies. The Jenkins Report referred to the National Association of Trade Protection Societies which agreed that its societies could ask exempt private companies for copies of their accounts when judging their credit-worthiness. It added that it would not only be simpler but much less embarrassing if they could see the accounts of such companies filed at Companies House. The concept that, to give a convenience to a private company that deals in credit rating, is an adequate reason for requiring thousands of companies to file their accounts at Companies House seems to be out of tune, to say the least, with current thinking. There was considerable comment in the Jenkins Report on the question of the disclosure of credit rating for those who extend credit. I ask the Minister to examine the damage which will be done if he abolishes in Northern Ireland the exemption from disclosure provisions which have been abolished in England. I know, and the Minister knows, that the Government are considering the possibility of bringing back these exemptions. There are thousands of company accounts being filed unnecessarily. No one examines them. There is all of the work involved at Companies House in checking with companies which have to file and seeing that they do so on time. Since the format of accounts has been changed many boards of directors do not understand the accounts, let alone many others who would otherwise be interested in them. Who looks at such accounts? There are the creditors and those who are thinking of making a take-over bid. I would have thought that the Minister would accept that, particularly in the provinces, in Northern Ireland, Scotland and the West Country, there is a considerable disadvantage in the activities of the takeover bidder, who often comes from a firm in the South of England. When there is a cut-back in trade it is usually the bit in the provinces, in Northern Ireland, or in Scotland that is chopped off for rationalisation or centralisation reasons. I do not believe that there is any advantage in encouraging a take-over bidder to extend his activities into Northern Ireland. Competitors also examine the accounts which are filed. It is nice for a competitor to be able to know another manufacturer's price. If one company is supplying a local market while its competitor is supplying markets all over England, Scotland, the West Country, Wales and Northern Ireland, it is possible for that competitor to discover the exact profit margin of the other manufacturer. He will then know what he has to do to drive the local man out of business. He cannot be got at in the same way. The larger competitor has lost his local trading activities through all of the other areas in which he trades. This is a serious risk to the one-product company, of which there are many. This risk applies to new businesses, such as those encouraged by the Northern Ireland Development Corporation. For these one-product companies disclosure means that their competitors can work out exactly their profit margin. In England today the small businesses are at a disadvantage in terms of disclosure requirements as compared with EEC competitors. The Minister admitted that when he said that there was a possible disadvantage involving disclosure in connection with the Irish Republic. There is certainly that disadvantage in connection with the EEC. Now the Minister seeks to extend to Northern Ireland the same disadvantages that we labour under in the rest of the United Kingdom. There is the additional question whether it is necessary to have disclosure to protect creditors. This is based upon an assumption that those who have limited liability as a benefit must pay a price for it. That is to misunderstand the whole history and purpose of limited liability. This provision was to encourage those not involved in the running of the business to put their savings into it, to invest, knowing that they were at no greater risk than the amount of money they invested. I would have thought that the Minister would be anxious to encourage investment in Northern Ireland. Yet he is introducing an order the effect of which will be to discourage people from forming limited liability companies and thus to discourage the outside investor. We are told that the intention is to protect the creditor. For whose benefit is credit extended? It is not extended solely for the benefit of the person extending it. It is a two-way arrangement. If people want to give credit they could ask the company for a copy of its audited accounts. It is not necessary to publish those accounts so that all and sundry may look at them. It is said that it is general practice to look at company accounts before extending credit. I have never heard anything so daft in my life. In 25 years of business experience the only time I ever looked at the accounts of companies in Companies House was when T was thinking of taking someone over. The accounts, when filed, are ten months out of date. They are totally useless as a way of satisfying oneself about the creditworthiness of the company. In the circumstances, I suggest that for the benefit of Northern Ireland and the whole of the United Kingdom the sooner there is extended to the United Kingdom as a whole the benefit of exempt private company status such as now exists in Northern Ireland, the better. The sooner we implement the fourth directive and allow the smaller family business to operate without disclosure the sooner we shall be making it more attractive to people to start businesses and create jobs.4.39 p.m.
I say to the hon. Member for Basingstoke (Mr. Mitchell) that so far from his owing any sort of apology to hon. Members representing Northern Ireland constituencies for seeking to intervene in one of these debates, we welcome not only his intervention but that of hon. Members generally representing seats in the other parts of the United Kingdom. There is only one point on which our susceptibilities might be delicate and that is where, by inadvertence, the hon. Member slipped into describing Great Britain as the United Kingdom in contradistinction to Northern Ireland. He did it only once, but we are sensitive on that score.
What I have said to the hon. Member for Basingstoke is implicit in the statements both of the Minister and of my hon. Friend the Member for Antrim, South (Mr. Molyneaux), that unless the contrary is proved, our view is that there should be parity of law between Northern Ireland and the rest of the kingdom. If that is so, then law-making for any part of the United Kingdom must be of concern to the whole of the House and hon. Members in all parts of it ought to have the opportunity, and be encouraged, to participate. That brings me to the one point which I wish to make. It has come to our knowledge—at least, it has been stated—that the Government contemplate a new companies Bill for Great Britain in the near future. I do not believe that the Minister of State referred to this possibility in his opening speech. Perhaps the imminence of such proposed legislation has been exaggerated, but what we would wish to say to the right hon. Gentleman and to the Government is this. He pointed out that in future, after this order has been approved by the Privy Council, company law in Northern Ireland will consist of only two instruments—the 1960 Northern Ireland Act and this order. The proposition I want to put to the right hon. Gentleman is that, if and when further legislation is introduced, the principle of parity on which he has based the case for this order ought to be carried to the point of that new legislation being legislation for the United Kingdom; for only so is it possible for hon. Members representing Northern Ireland seats, as for all other hon. Members, to participate in the general discussion upon the principles. The hon. Member for Basingstoke has, indeed, challenged one of the principles this afternoon. In doing that we ought to be in the position of arguing thane principles for the law of the United Kingdom as a whole. Having done so on Second Reading, we should have the opportunity, for those specially concerned, to participate at every stage in the detailed formulation of the legislation. It is quite true, and the right hon. Gentleman has mentioned this, that there are a few respects in which, even after this order, the law in Northern Ireland will deliberately be different from that in Great Britain. I shall not trouble the House with those respects. They were set out very clearly and carefully in the third appendix of the explanatory memorandum which the Department of Commerce issued simultaneously with the proposals for the draft order. But I do not think that anyone who addressed himself to those differences—I think there are four—could imagine that those differences were such as to make it impracticable, or even inconvenient, for future legislation to cover Northern Ireland at the same time. Obviously some sort of application clause, as not infrequently happens in respect of other parts of the United Kingdom, would be necessary. But it would certainly not be laborious or clumsy. Therefore, when there is further legislation on this subject, we look forward to that legislation complying with the spirit and the principles enunciated by the right hon. Gentleman in that it will be United Kingdom legislation and all parts of the House will participate in debating and refining it.4.44 p.m.
I would not wish to see legislation introduced in this House applied automatically to Northern Ireland, because I believe that if that situation should ever arise our hope of seeing a Stormont Parliament being restored would be dashed for ever to the ground. I want all Northern Ireland legislation to be dealt with separately and apart, where possible, from Great Britain legislation in order to make sure that as soon as possible we can have a Stormont Parliament or Assembly re-established so that the representatives of Ulster people can deal properly and in detail—which at present we are not able to do in this House—with legislation which intimately affects their lives.
I listened to the speech of the hon. Member for Basingstoke (Mr. Mitchell), who, in his customary lucid and able way, dealt with the objections to certain parts of this order. I concur in what he said. I do not wish to cover the ground which he has already dealt with. In doing so, I would not be adding anything to the hon. Gentleman's contribution or to the strength of opposition to the disclosure of accounts. However, I want to register my own opposition to part of the draft order and make this appeal to the Minister, even at this late stage, with regard to the disclosure of accounts. Since in due course we are to have a new body of company law in Great Britain, I would have thought that it was wiser to wait until we saw that legislation brought before the House. Indeed, some years ago—I think it was 1976—the Under-Secretary of State for Industry referred to likely radical changes in company law in Great Britain as a consequence of the United Kingdom being a member of the Common Market. It seems strange that the Government should be introducing a draft order which creates a greater burden for private limited liability companies in Northern Ireland than exists inside the Common Market. I wonder whether it is wise for the Government to continue with this part of the draft order, because what will happen—this certainly applies to Northern Ireland vis-à-vis the Irish Republic—is that an EEC competitor company will be able to look at the costs of the Northern Ireland company and find out what its profit margin is. But at the same time that information will be denied to the Northern Ireland private limited liability company. It is important that we should keep in line with the EEC in this regard, not just from the point of view of conformity with EEC directives but in order to ensure that we do not put onerous burdens on Northern Ireland companies which do not apply to their counterparts inside the Common Market. In recommending the draft order to the House, the Minister referred to security. Business men in Northern Ireland are aware, as is every citizen in Ulster, that any one of us is a target for the gunman. I am positive that if the terrorists see that some man is extremely wealthy they may contemplate kidnapping him. That makes life more difficult for the business man who contributes to the wealth of the Province and who provides the jobs which are desperately needed. We have 60,000 unemployed people in Northern Ireland. That is certainly nearly 60,000 too many. I ask the Minister not to dismiss lightly the complaints which have been raised by the business community about the security risk which this draft order will bring about. The business community in Northern Ireland welcomes the greater part of this order. It does not mind the disclosure of accounts. All it asks is that in the first place it should not be required to disclose them at present while terrorism continues and, secondly, that the order should keep in line with company law in the Common Market so that businesses in Northern Ireland are not at a disadvantage compared with their competitors in the Common Market, especially with those in the Irish Republic. I ask the Minister to think again about this. If he insists on pushing ahead with the order in this form, I hope that he will give a solemn pledge on behalf of the Government that there will be no demand for the disclosure of accounts while the security situation remains as it is.4.50 p.m.
I apologise for not being here earlier. I had some travel difficulties which prevented my being in my place at the proper time. I am sorry that I missed the Minister's speech. However, I have been given what I hope is a fairly good briefing on what he said by one of my colleagues.
As I look at today's Order Paper, including the business currently before the House, I cannot help reflecting that Ulster, like the remainder of the United Kingdom, is in danger of becoming a grossly over-managed society. We in this House tend to put our fingers into social pies and business pies which we would be far better advised to keep out of, and when we talk about company law, I suppose that it is better to make the point in relation to business. It is elementary common sense that every burden which we place on business makes business less efficient and less competitive. I am sorry to say that both in Northern Ireland and in this part of the United Kingdom there is far too great a readiness to place unnecessary burdens on business, not just through company law but in many so-called social interests where we never stop to assess the costs to the competitiveness and efficiency of British industry. Hon. Members on both sides of the House will recognise that company law has a two-pronged duty. First, in terms of public companies, it must protect the interests of the public who invest in public companies and see that their affairs are managed in an honest and straightforward way. However, it is not the job of compny law to decide how a company should be run. The law's responsibility is considerably less than that in terms of the private company, where it is not a matter of the public at large investing but usually of a small group of people investing in a company with very special executive responsibilities rather than purely an investment interest. In terms of the public, the duty of the law in respect of the private company is to protect them only in so far as the private company's liability is protected. Those who trade and do business with a private company have a right and an entitlement to know the worth of those with whom they are dealing. That far and no further goes the law in protecting the public interest. In terms of protecting the participants in or members of a private company, the main responsibility of the law is to see that minority interests are not abused. Having set those two standards, when I look at this order I wonder whether we are not going too far. I agree with the Murray Committee that there is a very strong argument for saying that there should be a broad uniformity of law in this respect throughout the United Kingdom. But I emphasise the adjective "broad". It does not mean strict uniformity. The law should be shaped to protect and develop the interests of the companies and businesses according to the circumstances in which they operate. Northern Ireland is not a typical economic or business area when compared with the United Kingdom as a whole. The preponderance of private company activity is very much greater proportionately than in the rest of the United Kingdom. The private company in Ulster operates in a very intimate society. It is almost a fact that anyone whispering in confidence at one end of Northern Ireland will be heard at the far end of Northern Ireland. I am not in favour of facilitating the broadcasting of unnecessary information, but it seems that we might be about to do just that. Our company structure is very important to the operation of the business world, especially that of the private listed company. If we push too many burdens on it, I suspect that many small businesses will put to one side the structure of the private limited company and seek to carry out their business in other forms, even in other forms of limited liability. I am sorry that because we are legislating by Order in Council, we have no opportunity to study this subject, assess it and weigh it in the way that we should. Certainly we have no opportunity to move the amendments which I feel to be necessary. I appreciate that the Minister has undertaken that for the immediate future certain provisions will not be put into effect. But some of those provisions should never be put into effect, in my opinion. When shall we, the representatives of Northern Ireland, have an opportunity to see that they are not put into effect? Do we have to wait for another Government who take a different attitude to these matters? This is the grave disadvantage of legislating by Order in Council because, having made these criticisms, I must concede that there is a lot of good in this order. There is a necessary bringing of our law into line with legislation in Great Britain. There is a necessary measure of consolidation. But that in no way excuses the abuse of certain articles requiring disclosure. Those can be very damaging in terms of the Northern Ireland business climate. We have this compulsive and compelling requirement of the European Economic Community and, for a change, I have pleasure in noticing that it is less burdensome than the requirements of the United Kingdom law. I think that we could have left the more burdensome aspects of United Kingdom law until such time as it became absolutely necessary to consider them. As for the publication of accounts and directors' reports, in a small company operating in an intimate society, what benefit are we achieving when we say that private companies have to list and publish the names of all those employees who earn more than £10,000? There was a time, when this country was well governed, when £10,000 was worth a great deal. But £10,000 is no great sum today. If any level of income has to be disclosed, in my view £10,000 is much too low. If we are not careful, we shall be asking miners at the pit face to disclose their incomes in certain circumstances. I see the logic behind the principle which requires disclosure of this kind. If payments are being made to employees, directors or anyone else in a company that threaten the financial stability of the company or the confidence of the business world in the company, it is a matter for concern. But is this the right approach? If we have to have disclosures on these lines, should not they be dependent on a certain percentage of resources being eaten up by this sort of activity rather than by fixing flat sums? Why should the law compel any company, public or private, to disclose gifts to charities or even gifts to political parties? Let us remember that companies are entities under the law. They are entitled to have the same rights as the ordinary individual citizen who engages in business, subject to the conditions which are necessary for the safe operation of the companies. It seems to me that we are seeking to embark on action in this respect that is not in the interests of the proper operation of companies but is being embarked upon for purely political purposes. I believe that any legal entity, be it a corporation or company, in the United Kingdom, within reason, subject to the agreement of its board, has a right to make whatever gifts it feels like making. It may be argued that these provisions have already been applied in Great Britain without any great kick-back. Whether or not there has been any difficulty in Great Britain, I know with some certainty that this legislation will have damaging consequences in Northern Ireland. It was said a little earlier in the debate that difficulty could arise in Northern Ireland if the law becomes unreasonable and unnecessarily burdensome, because companies will be tempted to operate from a foreign neighbouring city in the Irish Republic. That is a factor which needs to be weighed carefully in the interests of business in Northern Ireland. I have one or two technical points to make in regard to Article 107. If the Department of Commerce has "good reason" it can give directions that a company should do this, that or the other. That is a most bureaucratic power to give. What does "good reason" mean? What right of appeal has the company if it disagrees with the Department's assessment of what is good reason? Should not a company have a right of appeal to somewhere or other? Certainly that argument is true of Article 108 if it is not true of Article 107. Article 108 gives almost an arbitrary power to officials to enter company property and carry out searches. Those officials have only to go through the formality of appearing before a justice of the peace to obtain the issue of a warrant. With all respect to justices of the peace, I submit that they are not a competent body to assess the issues involved in such a search. I should feel much happier if the Department's officials and inspectors were required to appear before a much more competent court to justify the serious activity of searching business premises. I shall not weary the House unduly with technical points, but there are many such points, regarding provisions which we have no opportunity to amend. The Minister may say there was plenty of opportunity for consultation long before the order came to the House. No doubt he will add that he has been ready to receive representations. We appreciate that such a process ameliorates the position, but it is no substitute for the fruitfulness of parliamentary debate and for the consultation and research which such debate makes necessary. One may try as hard as one can to carry out these matters through the process of consultation, but one finds it inadequate. As a Member of Parliament, I should not have to negotiate or consult behind the backs of my electorate. If I have something to say to the Government, this is the place for me to say it, and the people I represent should know what I am saying. I concluded by saying that there is much good in this order, but once again it illustrates many of the deficiencies and shortcomings of direct rule, and through it, harm will be done to the business community in Northern Ireland.5.4 p.m.
I wish to declare an interest. I happen to be an honorary director of a limited liability company. I do not receive anything for being in that capacity, apart from a lot of headaches and heartaches. I wish to contribute only briefly to this debate because I believe it would be wrong for this subject to be debated without my underlining the fears which have been expressed in this debate.
We are caught up in the iniquitous system of ruling part of the United Kingdom by Orders in Council. Other matters are due to come before the House today and the longer we debate any particular order, the more we cut time from the discussion of other orders. Therefore, we are today at a double disadvantage. First, there is a limitation as to time, and we also know that if we take more time dealing with one order, that will be taken from the amount of time available on a matter which is of concern to everybody in Northern Ireland which will arise later today.Order. I think that the hon. Gentleman has made a mistake. There is no question of cutting time from one order as opposed to another. This order can run until 11.30 p.m. It is up to hon. Members to adjust their timing accordingly. After that, according to the Standing Orders, each order is allowed one-and-a-half hours of debate.
On a point of order, Mr. Deputy Speaker. With geat respect, what you have just said to the House is correct, but what you have said of this order applies also to orders that will follow it. Therefore, it is possible for a subsequent order entered upon before 10 o'clock to occupy more than one-and-a-half-hours. In referring to that fact, surely the hon. Member for Antrim, North (Rev. Ian Paisley) was correct in saying, although it does not arise directly from the Standing Orders of the House, that extension of debate on this order may, and probably would, curtail debate on one of the subsequent orders.
I am obliged to the right hon. Gentleman, but the question of the allocation of time allowed for the first order is entirely for hon. Members. If they wish to spend the whole of their time dealing with the first order, that is up to them. However, we are not seeking to curtail discussion of the other orders.
I was aware of the point you made originally, Mr. Deputy Speaker. The point I was trying to make was that the matrimonial causes order, which comes up for discussion later, runs deep into the heart of the whole community in Northern Ireland. If that order had been called first today, we could have debated it until 11.30 p.m. These other orders would have taken one-and-a-half hours each. The point I was making was that the longer we spend discussing the order that is now before the House, the more we shall curtail discussion time on subsequent orders. If those orders are discussed after 11.30 p.m., we shall have one-and-a-half hours on each.
I wish to emphasise to the Minister that there are areas in Northern Ireland in relation to which one cannot make the law uniform with the rest of the United Kingdom. Scotland is part of the United Kingdom, and we have heard strong arguments by Labour Members that Scotland must remain part of the United Kingdom, but Scotland contains different laws from those that apply to the rest of the United Kingdom. Furthermore, I understand that different laws apply to Wales, although England and Wales are usually taken together. I believe that in some matters we should have combined legislation which makes it easier for the House to deal with subjects relevant to the whole of the United Kingdom, but even in such Bills, special provisions are often made for different parts of the United Kingdom. We should not say that just because the rest of the United Kingdom has a law, Northern Ireland must also have it. The law in Northern Ireland might be better and it might be that the rest of the United Kingdom would be wise to conform to the law in Northern Ireland rather than vice versa. For example, we in Northern Ireland are streets ahead of the rest of the United Kingdom in regard to our ombudsman because he can receive complaints from local authorities, which is not possible in the rest of the United Kingdom. Perhaps the rest of the United Kingdom should look at Northern Ireland not through the usual jaundiced eyes, but to see which provisions in Northern Ireland would be good for the rest of the United Kingdom. This is a lengthy order. It includes 153 articles and seven fairly long schedules. It merits a real parliamentary debate including First and Second Readings and a Committee stage. I agree with the right hon. Member for Belfast, East (Mr. Craig) that the best way of considering such legislation is not by consultation before orders are laid. We are happy that the Minister takes time to consult and we appreciate some of the amendments that he has been able to concede to interested parties as a result of that consultation, but it is no substitute for proper parliamentary debate and the proper bringing of legislation before the House. I suppose that we are fortunate that we are having these debates on a Tuesday. Usually, they are held on a Friday. I do not know whether it was feared that the cafeterias might run short of fish this Friday, but the fact that we are debating the orders today is a crumb of comfort to us. More and more undigested legislation affecting Northern Ireland is being pushed through the House and the time has come for us to underline this fact. Perhaps continual dripping may eventually wear away the flinty hearts of those who bring the legislation before the House. I must make allowance for the fact that, I am told, this is the only way in which, under the law, Ministers can bring forward such proposals. I am not so sure about that, but that is what I am told when I correspond with Ministers. I must make clear that companies in Northern Ireland have nothing to hide. I do not want it to go out from this House that companies in Northern Ireland are afraid of legislation. However, the Province is passing through a difficult time and I am glad that the Minister has told us that he will not activate certain matters because of the difficulties that he appreciates. However, an outside body—the Common Market—can tell us how these businesses should be run, and if it intervenes, the Minister must abide by what the Common Market says. I do not think that we should necessarily abide by what it says, but that is a matter for another debate. We have an interesting proposition before the House. The Government have to admit that there are certain sensitive matters in the order which the Minister does not want to activate until he has the good will of the business community. I would rather that these matters were not activated at any time. There are certain fears about this legislation and certain parts of it that we would like to delete, but that is not possible. As other hon. Members have said, there are good things in the order, and this is where Northern Ireland Members have to weigh up whether we should go all the way and divide the House and make our protest in that way or say that the good outweighs what we do not like and we shall therefore allow the order to go through without a Division. That puts us in a difficult position. There are matters which come before us which are necessary to the community, but they sometimes include provisions with which I entirely disagree. I have to consider whether to make a protest and try to wipe out everything or to say that the good outweighs the bad and therefore I shall give the legislation tacit support. That is not a good way for any representative to have to work. I line up with those who have pointed out the fears of the business community in Northern Ireland. I do not want companies to go south of the border rather than put themselves under the obligations of this legislation. I do not believe that the Minister wants that to happen. He wants to keep companies operating from their base in the Province. However, there are real fears and legitimate critcisms which the right hon. Gentleman must take on board.5.16 p.m.
The House will he grateful to the Minister for his careful explanation of the draft order. It is a most important order, running to 137 pages. For Great Britain or for the United Kingdom, such a measure would have involved the normal legislative procedures in each House. Because the order relates to Northern Ireland alone, there has been only a short debate in another place and there will be only a few hours of debate in this House. There has been no possibility of amending the order in either House. This is a procedure to which the House has grown accustomed, but it is a procedure which is wholly unsatisfactory.
The Government in their explanatory memorandum have referred to the debt that is owed to Mr. Justice Murray and the members of his committee which reported on the company law of Northern Ireland in 1973. That report was presented to my right hon. Friend the Member for Penrith and The Border (Mr. Whitelaw) four and a half years ago. The committee was set up as long ago as 1969, before the introduction of direct rule, by the then Minister of Commerce, Mr. Roy Bradford. The order therefore represents, in a sense, the partial implementation of recommendations made by a committee set up nine years ago. The order is of constitutional and economic importance. It is of constitutional importance because it brings the company law of Northern Ireland into virtual parity with that of Great Britain. It is of economic importance because we believe that, on balance, the provisions of the order will lead to a more efficient company structure in Northern Ireland. Therefore we support the principles lying behind the order. We agree with the preamble in the Murray Report which said:On the question of the privacy privilege as it relates to private companies in the Province, the Murray Committee said:"in the whole field of company law the uniformity principle is a sound one and that, as a general rule of policy, the law here on any particular topic should not differ from the law in Great Britain unless there is good ground or reason for making or leaving it different."
The Government have followed the advice of the Murray Committee, advice given nearly four years ago. Of course, the security situation in Northern Ireland has improved substantially over the past four years. Nevertheless, as the Minister acknowledged, there are fears in Ulster that the requirement to file accounts and related information and to give details of directors' remuneration and all political and charitable contributions could help indentify industrial targets for a terrorist and could attach to leading business men the risk of kidnap or attack. Those fears may or may not be justified, but they exist. As they exist, and as they are genuinely felt by the key element of the population in Northern Ireland, I am sure that the Minister is right to follow the advice of Mr. Justice Murray. The whole House is at one in stressing what is in many ways the normality of life in Northern Ireland. One of the most extraordinary features of the past decade is the extent to which the commercial and industrial life of the Province has been able to continue, despite the ordeal through which the people have passed. Although we stress that there are excellent commercial and industrial prospects for investors in the Province, whether they are from within or without Great Britain and whether they are from within or without Northern Ireland, it is right that we should recognise that there is a case for deferring the introduction of the articles to which the Minister has referred. When the Minister replies I hope that he will tell the House which articles will be suspended and will confirm that the Government have power under Article 1(1) to bring into operation different articles in the order at different times. It has been argued that the whole structure of companies in Northern Ireland is very different from that in the rest of the United Kingdom and that separate considerations and separate laws should apply. I find myself in respectful disagreement with those arguments. There are slightly fewer than 10,000 companies on the register in Northern Ireland. Of those companies 67 per cent. have capital of less than £20,000 and 93 per cent. have fewer than 50 employees. It would be easy to find six counties in Great Britain where there was a similar pattern of company size, structure and employment. The case for a special, separate law in Northern Ireland is no stronger than, for example, the case for a separate law for Devon, Dumfriesshire, Cornwall, Cumberland, Shropshire and Westmorland. Those six counties have a structure of industry and agriculture that is in no way dissimilar from the six counties in Northern Ireland. It has been argued that the proposed reform of company law in the Province will put Northern Ireland companies at a disadvantage compared with companies in the Republic, but trade between Great Britain and the Republic is substantially greater than trade between Northern Ireland and the Republic. I have never heard it argued seriously that United Kingdom companies are disadvantaged as a result of our company law when compared with companies in the Republic. I turn to the points raised by my hon. Friend the Member for Basingstoke (Mr. Mitchell) and the right hon. Member for Belfast, East (Mr. Craig). I am bound to say that in welcoming the order it is not necessary to agree that company law in Great Britain is perfect in every respect. I agree with my hon. Friend the Member for Basingstoke and the right hon. Member for Belfast, East when they both argue in favour of less onerous burdens being placed upon companies by Secretaries of State or Ministers of Commerce. I wish to reassure my hon. Friend that I am no friend of an extension of bureaucracy. We welcome the strengthening of the powers of inspection by the Department of Commerce. However, the right hon. Member for Belfast, East was justified in pointing out that the powers contained in Articles 107 and 108 are precisely those that would normally have been probed most thoroughly in Committee if this measure had taken the form of a Bill. I agree that we would welcome a much clearer explanation—I make no criticism of the Minister—than we have been able to have so far about the circumstances in which the powers envisaged in Article 107 will be used. Before many months are out the House will have before it further company legislation. That will depend in part upon the implementation of directives from the EEC. I confess that I share the hope of the hon. Member for Antrim, South (Mr. Molyneaux) that the next Companies Bill to come before the House will refer to the United Kingdom as a whole, with only such minimal changes as those for which there is an overwhelming case as regards Northern Ireland. We welcome the order and we commend it to the House."While we are recommending a change in the law we are quite satisfied that in view of the emergency conditions now prevailing in this province and their effect on trading in certain areas, it would be most undesirable to introduce that change until more settled conditions have returned, and we so recommend."
5.26 p.m.
First, I put on record how much I appreciate the valuable contributions made by hon. Members to the debate on this important order. Their contributions reflect the interest expressed in Northern Ireland during the consultation process when I received many communications, some of them for the order and some against.
Some of the arguments that have been advanced today against the order are in some respects similar to those that were advanced when the Great Britain Companies Bill 1967 was passing through the House. Some of these fears have not been borne out by events. I have no reason to believe that the position will not be the same in Northern Ireland. Hon. Members have raised a number of matters on this detailed and complex measure. I shall endeavour to reply to them. However, I am mindful of the pressure on time. I shall endeavour to get on and make progress as I know that the House wants to move on to other important matters. The problems of the business community and security matters formed the theme running through the debate. The Murray Committee recommended that full disclosure should be introduced only in a more settled situation. I take all the points that have been wrapped around that theme by the hon. Member for Antrim, North (Rev. Ian Paisley) and others. I share their concern. I am celebrating my fourth anniversary of being a Northern Ireland Minister this week. I have been around and I fully share the anxieties and concern that have been expressed. It is difficult to be certain of getting the correct answers. Do we permit terrorists to dictate our policy or do we take the risk that is envisaged in the order? I have received counter-submissions from responsible sources stating that terrorists do not need balance sheets and profit and loss accounts to know which company to attack, and that full company disclosure should take place immediately. It was interesting that most of the firms and individuals who wrote to me used company paper, setting out all the directors' names and other information. I was guided by the report of the Murray Committee. I consider that it got it right. It recommended disclosure but suggested a postponement until we are able to judge how the security situation is progressing, or until we are forced to disclose under the fourth EEC directive. I have taken that on board. The recommendation has been generally welcomed by the House and by the business community in Northern Ireland. It is not much good trying to bulldoze a measure of this sort through Parliament if we do not bring along those whom in general we are supposed to be bringing along. It might have been thought before the order was considered that the percentage of private companies of the total number of companies in Northern Ireland was much greater than in the rest of the United Kingdom, and that the same would apply to the number of small businesses in Northern Ireland and the number that they employ. I was not too surprised to discover that that was not the position. However, I was surprised how close the figures were for Northern Ireland and Great Britain. I gave the figures in opening. The figures for businesses employing fewer than 50 workers in Northern Ireland are 93·2 per cent. compared with 93·4 per cent. in the rest of Great Britain. The employment totals show that here is another myth that we have probably produced ourselves. It has been suggested that the structure in Northern Ireland is totally different from that in the rest of Great Britain, but it is not. I find the take-over question very interesting. I should not have thought that small businesses in Northern Ireland would be attractive take-over propositions. I consider that firms in Great Britain are more vulnerable to that kind of thing than firms in Northern Ireland. I know that take-overs occur throughout the United Kingdom. But I should have thought that the Irish Sea would cut off small businesses in Northern Ireland from the danger of take-overs by large firms in Great Britain. I have received counter-arguments in favour of take-overs, such as the better utilisation of assets, the bringing in of new ideas and technology and so on. During consultations, prior to laying the order, I was told that there would be changes in United Kingdom company law. I should not have moved this order today if another order or Bill were to be published tomorrow which would change the law. I have looked into the possibilities of changes in company law in Great Britain but have found no indications that such changes are likely to take place. If such changes were enacted at any time, this order would place Northern Ireland in an ideal position to make similar changes in its company law without too much difficulty. I take on board the point made by the right hon. Member for Belfast, East (Mr. Craig) and his hon. Friends about the law in Great Britain. There is no need for me to rehearse the arguments. We could rehearse them on every order with which we are to deal this evening. There was a point about competition from companies in the Republic of Ireland. My record shows that I have considered this matter very closely: I have been travelling round the world and living out a suitcase to such an extent that my good lady has sent me a twenty-fifth wedding anniversary card to the House of Commons to remind me of it; I sometimes wonder what is happening to me. I shall look at this matter very closely. We do not want to chase any jobs south of the border. The easy reply would be to say that the position is no different in other EEC countries where there are wide divergences in requirements between neighbouring States, but I agree that our close proximity with the Republic of Ireland justifies more consideration. We can only guess how full the Republic of Ireland's disclosure provisions will be. I understand that it will be only a matter of time before there will be pressure from the EEC to bring all member States into line with a uniform high standard of disclosure provisions. In my deliberations in Northern Ireland, no one raised or was fearful of that matter. The order will put Northern Ireland on near parity with the rest of the United Kingdom until the EEC directive comes along. Many people have said that there is a lot of good in the order, especially for minorities, shareholders and the people who work in small firms. There has been trouble in the past because such provisions have not operated in Northern Ireland. I have had to wrestle with many difficulties. I welcome these provisions on behalf of the minorities represented in Northern Ireland. I commend the order to the House.Before the Minister sits down, will he tell the House which articles in the order will be suspended in accordance with the undertaking that he gave earlier?
I cannot reel them off just like that, but I promise to send the hon. Gentleman a detailed answer.
Question put and agreed to.
Resolved,
That the draft Companies (Northern Ireland) Order 1978, which was laid before this House on 6th June, be approved.