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Company Law Reform Bill [Lords]

As other hon. Members have done, I remind the House that I have a registrable shareholding that is set out in the Register of Members’ Interests. We have had a good-hearted debate, even in the past few minutes. The Bill is highly significant and I am grateful to all who spoke. We all recognise that company law is an important building block that helps us to sustain and strengthen our growth and prosperity. The world is an increasingly open place in which to do business and the business world itself is changing with the advent of new technologies and working practices. In that context, a flexible and modern system of company law that is accessible to all sizes of business is crucial to the UK’s success. Many hon. Members on both sides of the House have recognised that that is what the Bill provides. Historically, company law has been a UK strength. We were one of the first countries to put in place a legal framework to regulate the organisation and management of companies. That framework has generally stood the test of time well and has been recognised as a model for other countries throughout the world. However, over time, law with such historical roots can become out of date. In the 1990s, a consensus emerged that our system of company law needed improvement. The Government thus established the company law review to provide an expert and independent analysis of the areas in which the law needed updating and to come up with recommendations for change. In very large part, the Bill follows the route map that the review provided. The company law review established the principle that policy in this area is best determined through as inclusive a process as possible. Again, many hon. Members have acknowledged the inclusive nature of the policy. We have attempted to follow that principle when possible, and the final provisions of the Bill reflect a thorough process of consultation. As others have said, the process has been a model of the sort of way in which we should legislate. That is one reason why, whatever differences remain on specific proposals, the Bill has such large support, not only in the House but from business organisations and other stakeholders with an interest in company law. The Bill is rightly seen as a landmark that will bring real improvements to the way in which companies operate in the UK. I shall say a few thank-yous. I pay tribute to the members of the company law review steering group and to all its working parties, and to all those who contributed to the review’s work. I am grateful to the many businesses and other organisations and individuals who contributed through formal or informal consultation. I pay particular tribute to my predecessor, my right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael), for all his efforts, which I am picking up quickly in bringing this major piece of legislation to this stage in its consideration. I mention also the extensive scrutiny that the Bill has received in another place. Unlike Opposition Members, I acknowledge Members on both sides of the House of Lords who participated in consideration of this measure in that place. As for Government peers, Lord Sainsbury of Turville did an excellent job, supported by Lord Goldsmith and Lord MacKenzie of Culkein. Conservative Members failed to mention the contribution of Labour peers, but I acknowledge the contributions of Lord Hodgson of Astley Abbotts, Lord Freeman and Baroness Noakes, and for the Liberal Democrats, Lord Razzall and Lord Sharman. I think we all agree that there have been contributions that have improved the Bill. In developing the Bill, we have followed a consistent set of principles. We want to ensure that the new law is as clear as possible, that it is as simple as possible, that it is modern and fit for today’s business purposes and that it does the maximum possible to get rid of any unnecessary burdens of regulation. I think that the Bill achieves those aims. The comments from stakeholders suggest that the Bill is already set out in ways that will make it much more simple for its users than previous legislation—particularly businesses—to understand the provisions that apply to them. I expect the measure to be further enhanced after we have had many hours of consideration in Committee of this very large Bill. Some specific areas of the Bill have been raised during the debate. I shall go through as many of those as time allows. The principal area, on which most of the debate has concentrated, has been directors’ duties and clause 158, associated with clause 399. Those matters were raised by Opposition spokespersons and in an excellent exposé of the concept of enlightened shareholder value by my right hon. Friend the Member for Cardiff, South and Penarth. They were mentioned in a good contribution by my hon. Friend the Member for Islington, South and Finsbury (Emily Thornberry), who, together with my hon. Friends the Members for Gower (Mr. Caton) and for South Swindon (Anne Snelgrove) asked us to beef up the provisions. The issue was raised in an interesting way by Opposition Members, who appeared to disagree with one another. The hon. Member for Grantham and Stamford (Mr. Davies) fundamentally disagreed with the hon. Member for Rutland and Melton (Mr. Duncan), who was not in his place to hear the contribution of his hon. Friend. The hon. Member for Grantham and Stamford wanted the certainty that his hon. Friend does not want. The hon. Member for Clwyd, West (Mr. Jones) disagreed with the right hon. Member for Suffolk, Coastal (Mr. Gummer), who thought that the approach was too timid. The hon. Member for Richmond Park (Susan Kramer) asked that we strengthen the business review. Enlightened shareholder value is a radical aspect of the Bill. In the past, we always believed that community aspirations and business success were seen as competing objectives. At the heart of the Bill—it is what it is all about—is our belief that that is wrong. Business success in the interests of its members and community aspirations, whether they be aspirations for employees, suppliers, the community, the environment or sustainable development, are interlinked ambitions, not competing objectives. We want business to prosper, and business will do that best when it acts in an enlightened way, recognising the part that it plays in strengthening and sustaining our communities. That is why we have developed the proposed legislation, which is based on the concept of enlightened shareholder value. Long-term prosperity for a business is about recognising the role that business plays at the centre of a community, rather than in conflict with community objectives. The legislation allows us to bring the behaviour of all businesses up to the best standard. Good businesses recognise the importance of good regulation and they want a clear, well-defined level playing field so that they are not at a commercial disadvantage if they do the right thing. The hon. Member for Rutland and Melton discussed inflexibility and confusion. He has got it wrong: a clear set of directors’ duties is incorporated in clause 158, but we have also provided the necessary flexibility so that companies can respond to a fast-changing environment. The list is not exhaustive, and we do not pretend that it is. He said that he wished to add 165 criteria—I hope that that is right—to the list. The hon. Member for Huntingdon (Mr. Djanogly), on the other hand, was worried about our having any criteria, although he was happy to reinstate section 309 from the Companies Act 1985. Our discussion of clause 158 and associated clauses showed that Opposition spokesmen are reluctant to change as the Leader of the Opposition wishes. Anyone can talk the talk, as the Leader of the Opposition does, but government is about walking the walk. That is the toughest lesson that the Notting Hill set must learn if it is ever to consider a role in government.