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Company Law Reform Bill [Lords]

I am grateful to have the opportunity to take part in this debate. At the outset, I must declare my interest, as recorded in the Register of Members’ Interests, not only as a non-practising solicitor—I have in the past practised in the City of London—but as a fellow of the Institute of Chartered Secretaries and Administrators and as its parliamentary adviser. I was the group company secretary for a FTSE-100 company before entering Parliament, and it may help if I start with a small story from my by-election in 1999 that helps to describe the mental map with which the Government approach these complex issues. Anyone who has been trained in the law knows of the enormous amount of statute and common law that provides the certainty and the competitive base from which our country can compete, fairly, honestly and transparently. During the by-election, the Labour party made desperate attempts, with many investigators looking into my background and chasing my family and friends, to discover whether there was anything that it could give to The Guardian. At one point, as my campaign vehicle arrived at a country pub for a lunchtime rendezvous, I was greeted by two of my team, who were ashen-faced. They said, ““There’s a real problem, Stephen. The Labour party has just fed The Guardian with a piece of news that will completely derail the campaign. It claims that you have 273 directorships.”” I said, ““Let them print.”” Because I was so relaxed about it, The Guardian got cold feet and did not print, so we could not embarrass the Government on that issue. It was obvious that a FTSE-100 company group secretary should be a director of all the subsidiary companies registered in the UK, because it would be grossly bad business and inefficient for different people to be employed as company secretary for each individual company, as the 1947 Act and other legislation stated. Indeed, as the group secretary, I was the chairman and director of the 100 per cent. owned Redland Secretaries Ltd, which was the corporate company secretary to each of the group companies. That was good business and good risk management, and it was what most FTSE-100 companies did. Clearly, Labour did not understand that, and we see the result today. The Bill is a generally good reform of company law, which has undergone a tremendous amount of review and consultation, with experts being able to give their advice freely in a long process. However, at certain points the Government have decided that they want some totemic change and displayed their ignorance of the business world. We must be able to manage risk confidently so that everybody who treats with private enterprise—which creates all our wealth, underpins our democracy and gives Members of Parliament the chance to represent our constituents—the choice about how that wealth is raised, spent and, through the public purse, deployed. I congratulate everybody involved in the process of company law reform. The Bill has been a long time in the making—we have been calling for it for many years—but after eight years, which more or less coincides with my time as a Member of Parliament, we have it. It is a large Bill that will get larger, as the Government have—rightly—decided to interleave it with the remaining parts of the 1985 Act, so that we have one statute as the corpus of corporate law. It is sensible to seek to update the law. As every lawyer knows—indeed, most make their living from it—the danger is that tinkering with legal drafting creates uncertainty and inconsistency, because precedents are not necessarily included. However, my colleagues in the other place did an outstanding job in scrutinising this wide-ranging and technical Bill. Many other noble Lords made worthwhile and important contributions to the debate, which has given us a much better Bill. Most of the issues will require clarification and detailed discussion, and that is best left to the Committee stage. It would not be right to take up the time of the House going through many technical issues. However, I have a keen interest in one point of principle, which will be obvious from my declaration of interest. The principle has not been much discussed today, although it was raised in the other place, but it is the proposal to scrap the requirement for private companies to have a company secretary, as set out in clause 253. In appraising whether the Government have made the right judgment call on that issue—whether it will deliver the totemic, deregulatory effort that they wish to be able to claim for this Bill—we have to go back to first principles. Will it bring company law up to date, and make it more flexible and accessible to all companies? We have to think small first, because that is where new wealth is created. It is also where most of the employment is generated. As legislators, we are now increasingly aware that we should seek to simplify the way in which the law is drafted and operates. As anybody who has had the foolish notion of listening to any of my utterances in the House over the past few years will know, I am obsessive about the need to deregulate, because the burden of regulation on companies, individuals, families and communities in this country is bearing down on our ability to enjoy life and be competitive, and it is anathema to the ways in which humans best behave and operate. It takes away their judgment and replaces it with a tick-box exercise, which means, as long as it is satisfied, that they need no longer think about how to do the right thing in the right way. We must also at all times aid competitiveness. Above all, we must not lose sight of the fact that this country has a well deserved reputation for establishing so many of the principles that govern corporate competitiveness and the ability to trade across the world. Let us not forget that part of what we trade is our system for organising business—our corporate law and the way in which we administer our corporate affairs. Among our greatest exports are the various schemes for trading and methods of ensuring that companies have good administrators who act as internal civil servants. On those principles, the Government have, understandably and logically, decided to retain the current law on public quoted companies. Clauses 254 to 263 enshrine the compulsory requirement for all publicly quoted companies to have a secretary. That is right and it is consistent with first principles. However, the requirement is to be scrapped for private companies, reversing section 283 of the 1985Act that"““every company shall have a secretary””." The reason behind that provision is that it gives every company, whatever its size, a second pair of eyes. Even in what we lazily call mom and pop companies, a second pair of eyes is needed—although we can consider the degree of the requirement. The principle applies to all areas of governance. The House has learned, from bitter experience, that problems have arisen in primary care clinical governance with single GP practices. I need not mention the name Shipman as an extreme example. Many professional bodies, such as the one to which I belong and the Association of Chartered Certified Accountants, have argued that it is wrong in logic to remove the requirement for private companies to have a company secretary. What have the Government got against the poor old company secretary in private companies? A company secretary is good at advising chairmen and directors about new developments, compliance requirements, codes of practice, regulations and points of law. The company secretary is often regarded as a company’s civil servant, or its conscience. He or she provides information and advice, records meetings and ensures that the proper processes are observed and recorded. He or she also monitors and records the implications of decisions, and ensures that papers for members of the board are properly prepared so that decisions are made and followed up correctly. All of that can happen without a company secretary, but a company that has one knows that that person is required to carry out all those functions.