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New Clause 22

Volume 979: debated on Tuesday 26 February 1980

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Application Of Sections 54 To 58 And 60 To 64 To Unregistered Companies

Section 435 of and Schedule 14 to the 1948 Act (which provide for the application of certain provisions of that Act to unregistered companies) shall have effect as if sections 54 to 58 and 60 to 64 above were provisions of that Act and were included among the provisions of that Act specified in that Schedule which relate to accounts and audit; and the reference in the last entry in column 3 of that Schedule to provisions applied by virtue of the foregoing entries in that Schedule shall be construed accordingly.'.—[Mr. Eyre.]

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

The effect of this new clause is to enable the Secretary of State, by statutory instrument, to extend the disclosure provisions of part IV of the Bill to unregistered companies. These are defined in section 435 of the Companies Act 1948 as
"all bodies corporate incorporated in and having a principal place of business in Great Britain"
other than a body incorporated by or registered under any Public General Act of Parliament or a body not formed for the purpose of carrying on a business for gain or any body from time to time exempted from the provisions of section 435 by direction of the Secretary of State.

The bodies corporate falling within this definition are, broadly speaking, those that are incorporated otherwise than by registration under a general system of incorporation. They include bodies incorporated by Royal charter or by Private Act of Parliament, and the provisions of the Companies Acts 1948 to 1976 do not automatically apply to them. There is, however, power in section 435 of the 1948 Act to apply to such companies those provisions of the 1948 Act that are listed in Schedule 14 to the Act, with such adaptations and modifications as may be specified by the Secretary of State in the regulations applying therein. In both the 1967 and 1976 Companies Acts and the European Communities Act 1972, provision was made to include in Schedule 14 those parts of those Acts that it was felt desirable to be applicable to unregistered companies.

The provisions of the Companies Acts that have been extended to unregistered companies are currently set out in the Companies (Unregistered Companies) Regulations 1975. Under these regulations the vast majority of the Companies Acts' provisions relating to accounting and disclosure have been applied without modification to unregistered companies, including section 197 of the 1948 Act and section 16 of the 1967 Act. The present position is, therefore, that companies formed under the Companies Acts, as well as unregistered companies, are subject to the same regime as to the disclosure of loans to directors and contracts between directors and their companies.

As presently drafted, clause 64 of the Bill, when it comes into effect, will repeal section 197 of the 1948 Act and section 16(1)(c) of the 1967 Act, and they will be replaced for companies formed under the Companies Acts by the broader disclosure provisions of part IV. As I have explained, those broader provisions will not themselves automatically apply to unregistered companies, so that a more rigorous regime of disclosure will be applied to Companies Act companies and no disclosure provisions, other than those contained in the constitutions of the individual companies, will be applied to unregistered companies. Right hon. and hon. Members will agree that such a result would be quite unjustified, and the aim of this clause is to enable the disclosure provisions of part IV, which replace sections 197 and 16(1)(c), to be applied to the unregistered companies as were these sections.

Therefore, the Government's intention is that the same requirements for disclosure of directors' transactions shall apply equally to Companies Act companies and to unregistered companies. I hope that this will meet with the approval of the House.

I make no complaint about this new clause. It embraces a sensible concept. However, regrettably, I want to start on a note of complaint. New clauses 20 to 24 were all tabled last Wednesday night. The Government have had a long time between the Committee and Report stages. On a technical Bill of this character the Government—aided, as they are, by a group of hard-working officials, who undertake the task with great dedication —should have been able to table this and the other new clauses long before last Wednesday night. If they were not in that position, they should not have proceeded with the Report stage at this juncture.

Faced with a large number of Government amendments. Opposition amendments and Back Bench amendments, it is extremely difficult for the Opposition to consult about these matters as we feel entitled to do. It is possible that the Government have got this one right. There is an awful lot that they have got wrong in drafting. I understand that. We are dealing with a highly technical Bill. One can never be absolutely right in company law. We shall return to that argument on another new clause.

On highly technical matters such as new clauses 20 and 23, this is not the right way to deal with the House. The Minister was kind enough to write to me and, I presume, to other hon. Members who served on the Committee about new clause 24, but the Government did not find time to write to us about the other matters. We are entitled to some explanation. One understands that Ministers are heavily burdened. All hon. Members have been heavily burdened with getting the necessary information and reading up the necessary law for this difficult Report stage.

I believe that the Minister owes those who served on the Committee an apology. I hope that in the absence of any real opportunity for scrutinising matters that require consultation with outside bodies the Government will recognise that it may be necessary for them to be scrutinised with great care in another place. I hope that the Government, if necessary, will not feel backward about producing amendments if such scrutiny requires this.

Having made that complaint, which also applies to other amendments, the Opposition feel that this new clause has a great deal to commend it.

I think that the hon. Gentleman is confusing me with the reasonable man on the Clapham omnibus.

I apologise to the hon. Member for Hackney. Central for having thought that I had seen him on the Clapham omnibus. The hon. Gentleman would certainly be qualified for the role of the reasonable person riding on than omnibus. It was entirely fair of him to say that this is a highly technical Bill. Having struggled with it in Committee, all hon. Members know that this is inevitably so. I am, therefore, sorry if Opposition Members have been inconvenienced by the fact that because of the sheer complexity of the matter and the pressure of events the Government have not been able to give much longer time to consideration of various clauses.

I am grateful to the hon. Gentleman. It is not a question of inconvenience; it is a question of not being able to do one's duty properly in scrutinising these difficult proposals.

I appreciate that. The hon. Gentleman, with his experience in Government, especially his experience in respect of these complicated matters, will know that the Government have to follow a complicated process of consultation with interested parties. The hon. Gentleman, if he thinks back some months, will know that this process of consultation takes up a long time.

The hon. Gentleman acknowledged that I had written to him about new clause 24. He will know that Ministers have tried to be considerate and to write to and consult Opposition Members. I do not wish to disguise the difficulty of the job that we have to discharge in this respect. I can only assure the hon. Gentleman —I thank him for the welcome that he has given the new clause—that we will continue to assist him as much as possible in discharging his job and dealing with these highly technical matters.

Question put and agreed to.

Clause read a second time, and added to the Bill.