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Companies Bill [Lords]

To put it briefly, we have tabled the amendment because the Conservative party believes that small parties are more susceptible to regulation and that their individual circumstances should be taken into account. In our amendments, we are attempting to take a constructive approach to improving the provisions, as the hon. Member for Bedford acknowledged. The amendments therefore take account of the still widespread concerns throughout the legal and business communities. We do not feel that they would weaken the Government’s position—that is not our intention. Part 10 and clause 173 are designed to codify existing, mainly common law, principles relating to the responsibilities of directors. That has led to vociferous and growing complaints from across the legal and business communities that those provisions in particular could cause company law to be altered dramatically for the worse. Historically, judges have had the discretion to deal with complicated issues relating to directors’ duties on a case-by-case basis; that system has been adaptable and effective in dealing with cases that are often complicated and highly technical. The existing duties found in common law rules and equitable principles which have been built up over the years in the courts are now to be replaced by the statutory statement in part 10. A flexible system is to be replaced by an inflexible one. On the one hand, the Government have said that there will be no change in the common law position; yet, on the other hand, they have introduced the concept of enlightened shareholder value, which all legal experts agree will alter the common law position of acting in the best interests of the company. We believe that there is a fundamental gap in the Government’s train of thought: either they are introducing a new concept, enlightened shareholder value, which is an extension of the common law, or they are simply codifying the existing common law. The Minister has still not made clear which course the Government are taking. According to the many interested parties whom we have consulted on the Bill, the position seems to be clear: if the audience is business-oriented, the Government message is, ““Don’t worry—nothing is going to change. This is only a restatement of the existing common law position.””