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Companies Bill [Lords]

I am grateful for the hon. Gentleman’s intervention, but he is confusing a duty with a right. We are not saying that it should be compulsory for under-16s to be directors, or that we would encourage it by legal force. Our argument is that in those cases where young people have set up their own business, it is not entirely wrong for them to have some sort of direction of the business. If they had taken a different approach—if they had set up the business and then asked someone else to run it for them, as the hon. Member for Huntingdon said—the law would treat them as directors anyway. They would end up being responsible, even though the starting point was that the law did not allow them to be directors. That is the point that the hon. Gentleman was trying to make about shadow directors. In the light of what the Government are doing about shadow directors, it seems to me that the provision in the Bill about young people being shadow directors could be justified, but only if the more general rule were changed. Government amendments Nos. 716, 770 and 717 deal mainly with whether there is an obligation on companies to register the existence of shadow directors. There is an issue of transparency—whether people who effectively run companies without officially running companies should in some way be registered by the company as people exercising that power. The problem is a practical one for companies—whether they can know whether particular people count as shadow directors, given the fact that the law is not very easy to apply, especially from the point of view of another company director. Courts might find it easy to apply, but companies might find it difficult. The history of the concept of shadow director is that it has been used by the courts to put liability on someone who deserves liability for actions that they have taken with regard to a company, perhaps without realising that they were directors. It is a remedial concept, rather than a real one. It is a construct of law that is used to achieve particular results. Because the concept is so artificial, it is going too far in practical terms to require companies to register shadow directors in such circumstances. Although there are problems with transparency in this area, on the balance of practicalities the amendments are acceptable.