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Company Law Reform Bill [Lords]

I do not accept that. I agree that many members of the public want to make informed decisions as to where they buy their goods and services. The Bill will help, as will other measures. The reason why the Government decided not to proceed with the OFR was that we were anxious to minimise the regulatory burden on companies in general. I forget whether the Liberal Democrats have a policy on that— I suppose it depends who they are talking to at the time. I do not accept the point that the hon. Lady makes about the business review. It will allow ample scope for all the things that need to be reported on to be set out as fully as possible. In Committee there will obviously be a great deal of scrutiny of the two clauses relating to the business review, as of others. The Government have sought to put on the statute book a major step forward. I accept that it is controversial, but it provides clarity, and something that will actually work and in the years to come will influence companies’ behaviour. Let us be in no doubt: the duty is certainly intended to affect a company’s behaviour so that it behaves ethically and has proper regard for all the matters set out in the Bill. I also want to make sure that the business review is properly understood. I believe that it will encourage directors to provide information that will enable people to make decisions. I shall now say a word about a small part of the Bill that was controversial in another place. It relates to derivative actions. We recognise that occasionally directors of a company may put their own interests ahead of those of the company. We have sought to introduce a new procedure that means that claims lacking merit will be thrown out at an early stage. We have provided a two-stage process. First, any applicant has to make a prima facie case. At the second stage, still before the substantive action begins, the court has to consider whether the decision of the directors was one that the company could reasonably and independently have taken. I believe that what the Government have done here will ensure that the process is not open to misuse, but will avoid the situation that we have seen in the past whereby a small section of the shareholders have felt that the directors have done something to the company’s detriment. Until now the remedy in such a situation was not clear. It is time that the remedy was put on the statute book. A lot of the Bill is designed to regulate companies better. It is essentially a deregulatory measure. Much of our companies legislation was put in place with large companies with numerous public investors in mind. It is worth bearing in mind the fact that more than 90 per cent. of companies have five shareholders or fewer, and that many shares are not publicly traded. The Bill will help smaller companies. It will make it more straightforward to set up a company. It will remove the prohibition on private companies providing financial assistance to purchase their own shares. It will simplify the way in which they take decisions, they will no longer have to have annual general meetings, and it will allow greater use of written resolutions. The Bill will also help bigger companies. It produces significant savings by removing obstacles in the way of electronic communications. We believe that the saving could amount to about £50 million a year for FTSE-listed companies alone.