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Company Law Reform Bill [HL]

moved Amendment No. 302:"Page 172, line 34, at end insert ““always providing that such undertakings shall include for the purposes of this section—" (i)   all subsidiary companies, (ii)   any associate that shall be a body corporate, trusts or undertakings of that nature which the company shall have had cause to sponsor or to which it has donated a sum either believed to be or which does represent more than 20 per cent of the sum available for disposition by its trustees at any time in the previous five years, and (iii)   any subsidiary or associate of such trust or similar undertaking if a body corporate.”” The noble Lord said: In speaking to Amendment No. 302, I shall speak also to Amendments Nos. 303 to 305 and the Question that Clause 383 stand part of the Bill. In part, this is to do with multi-national corporations and the relation to national company law. In the past hour or so, it has been very interesting to reflect on the particular requirements made right through the subsidiary chain in respect of political donations. I wonder why disclosure of financial information between parent companies and subsidiaries is so different for other aspects of activities. I will study very carefully what my noble friend says on the amendments, but on the face of it the door is left open to some questionable activities. The provision imposes a duty to disclose information about related undertakings but also grants the right to suppress information about overseas subsidiaries simply because that information is commercially sensitive. The amendment advocates that that right is removed, because such commercially sensitive situations are where some questionable practices and tax arrangements most commonly take place. Those practices expose companies to risk, as we have seen in some notable recent cases. The subsidiaries are therefore the ones whose existence and arrangements must be disclosed if the duty of the directors to shareholders and other stakeholders of the company is to be fulfilled. If the amendments are accepted, the duties that most of the corporate responsibility lobby thinks essential would be substantially incorporated into UK law. UK directors could not operate dual standards of care with regard to UK and overseas operations as they do at present, and substantial enhancements in the disclosure of overseas operations and tax haven activities of UK corporations would have been made. Clause 382(2)(b) provides considerable discretion as to the undertakings to which the regulations should apply. In view of that, we should give indications as to the range of entities to which we would wish the regulations to apply. Clause 382(3) allows reference to the overseas undertaking to be omitted from the financial statements of the group if its trade would be harmed by disclosure. This provision is, on the face of it, in direct opposition to the requirement of transparency that is now widely acknowledged to be essential in the conduct of international trade. If a trade can be conducted only in secret, it questions the basis of it. That is why that subsection does not have my support. My amendment is designed to protect employees. Clause 383 provides that where a company has a large number of related undertakings it need not publish a full list of those undertakings in its financial statements. Companies with large numbers of related undertakings are precisely those that are most likely to require such disclosure to obtain a full understanding of the company. On the question of annual returns being on public record and being sent to members, at the moment they are not available without the payment of a fee. They are rarely subject to analysis either by investors or by the investment community, and they are not an adequate method of disclosing information. The question of limitation of space is a rather arbitrary criterion for non-disclosure. The definition of requirement for disclosure is very subjective indeed:"““The undertakings whose results or financial position, in the opinion of the directors, principally affected the figures shown in the company’s annual accounts””." That could be defined in many ways and, as such, disclosure is likely to be seriously inconsistent between companies, and maybe between periods of time within the same company, and that does not result in high-quality financial information being produced. I beg to move.