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Companies Bill [Lords]

I agree with the hon. Gentleman that we have had a very good and high-level debate. All the contributions have showed the great deal of seriousness with which the issues have been considered. I particularly thank my hon. Friends the Members for Newcastle-under-Lyme (Paul Farrelly) and for Great Grimsby (Mr. Mitchell) for setting out their strong objections to the Opposition new clauses. Both my hon. Friends are ex-journalists who are greatly concerned about the impact of the Conservative proposals on investigative journalists seeking to expose scandals in big companies, for example—a point that everyone will want to take account of. The hon. Member for Huntingdon (Mr. Djanogly) also made some important points about the dangers resulting from animal rights terrorists and others who seek to damage not just individuals, but the biotech industry itself. I share his concerns about Huntingdon Life Sciences, when individual employees of the company as well as other organisations that supply it have been subjected to attacks by animal rights terrorists. I have talked to employees of Huntingdon Life Sciences who have been the victims of having their cars blown up outside their homes with fire bombs. The Government recognise the dangers of such activity and we have passed legislation in recent years to tackle the intimidation, harassment and other criminal acts that have been a feature of animal rights terrorism. The issues have been addressed to a considerable extent by the criminal law and the Government take them enormously seriously. Company law has a role, but it is a limited role. Clause 117 provides safeguards for those who may feel threatened, and it will enable the courts to intervene and provide some security for individuals who feel at risk. I shall return to that point in due course. Let me deal more broadly with the new clauses and amendments. On new clauses 16 and 17, I begin by quoting the contribution of the hon. Member for Huntingdon in Committee. He said:"““There must be a balance and proportionality between access to a register and security for those on it.””— [Official Report, Standing Committee D; 22 June 2006; c. 183.]" I agree with that. The issue we need to consider is where that balance is struck. I fear that to deal with the real problem of animal rights terrorism his proposal is to change public access to the register of members—an issue deeply embedded in our company law—in a way that could well have adverse consequences. Ever since it has been possible to set up a company with a separate legal identity, the law has required the names and addresses of both those who own the company and its directors to be on the public record. As long ago as the 1840s, when Gladstone’s committee on joint stock companies reported, the lack of transparency about company shareholdings was seen as a major problem. By instituting a system of registered membership, Gladstone’s committee wanted to suppress such practices as"““concealing the names or preventing the meeting of the Shareholders…falsifying the books containing transfers of shares””" and"““the creation of fictitious votes, so as to secure the means of outvoting the bonafide Shareholders””." Of course, Mr. Gladstone and his colleagues did not have to contend with animal rights terrorists or ““boiler room”” investment scams, but the basic reasons for giving public access to the register, beyond those of investigative journalism, still hold good today. It is fundamental to shareholder democracy that members can hold the management of their company to account. To do that, they need to be able to contact each other and, sometimes, to be contacted by the general public. Company law must ensure that shareholders can be contacted without any risk of interference or hindrance from the directors. The impact of the changes proposed by the Conservatives would run counter to that basic view of shareholder democracy. Indeed, some of the other amendments that they have put forward could have a profound effect on our company law. New clause 16 would remove the essential underpinning of shareholder democracy. If a company were to have a ““confidentiality order”” under the new clause, all external communications to its members would be required to be ““passed on”” only by the company. How, and how quickly, is not specified, but speed is crucial if support is being sought, for example, for a resolution opposing one already tabled. How is someone seeking to convey a lawful message ever to know whether the company has complied with the request to pass the message to its members if he does not have the means to contact them? The enforcement mechanisms in subsections (9) to (12), and therefore the underlying obligation to pass on lawful messages, are worth nothing if a company’s failure to pass on those messages is undetectable, and there is nothing in the new clause to show how it could be. However, under clause 117, courts could deal with that problem. The new clauses do not substantially add to protection that can be achieved under clause 117 and that can be done be much more effectively by using the courts. The clause provides that, when a court directs a company not to comply with a request for access to its register of members, it may direct the company not to comply with similar requests. In other words, if it becomes clear that a company’s register of members has become the target of animal rights extremists or fraudsters, it should be possible for the court to make an order in terms that permit it to refuse requests for access that appear to emanate from similar sources. That makes unnecessary the provision in new clause 16 for company confidentiality orders, unless there is some fundamental view that that has to be done via the Secretary of State in a particular way, rather than in the courts.