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Companies Bill [HL]

moved, as an amendment to Amendment No. 245B in lieu, Amendment No. 245C: 245C Line 4, leave out ““and”” and insert ““or the company, or”” The noble Baroness said: My Lords, we could see no reason for the haste to put this amendment into the Bill in the dying days of its consideration in another place. During the Bill’s passage through your Lordships’ House, we inserted Clause 452, which gives the Government power to amend financial reporting requirements by order—an entirely sensible power that could have been used with a more seemly timetable and could have allowed for proper consultation and focused discussion. Noble Lords will be aware that many voices in the business community have urged us to delete Amendment No. 245. Instead, we have sought to work constructively with them to achieve an amendment which does least harm to the businesses that it will affect. The Minister explained the nature of reporting only contractual or other arrangements that are essential, and of course a disclosure is required only if it is necessary for an understanding of the business. The Government’s Back Benches in another place, and indeed the lobby groups, might like to reflect on whether these words will require any disclosure at all by the highly complex and diverse businesses found at the top end of the FTSE. The Minister himself made the case that it is very unlikely that significant, or any, amounts will be disclosed by such businesses in the FTSE—for example, Sainsbury’s, Tesco and HSBC. It is extremely unlikely that essential contracts will be necessary for an understanding of the business. Although it is very unlikely that these large companies will end up reporting nothing, that does not mean that the amendment is benign, because it is very likely to affect the smaller quoted companies, of which there are up to 2,000. One problem with the amendment that has been pointed out by the Stock Exchange, the Quoted Companies Alliance and the CBI is that every company will have to go through the process of considering what it has to disclose, and for many that will be an onerous task. However, the real burden will be borne not by the companies in the FTSE that have large departments that deal with this sort of thing, but by the smaller quoted companies which are less diverse and may well have essential contracts that need to be disclosed for them. The Government have talked a lot about easing the regulatory burdens on business, and they made that one of their themes for the Bill. But with Amendment No. 245, they have in practice loaded the burdens on to the quoted companies least able to bear them. The danger lies not in the administrative costs that will be borne and in the diversion from running the business that will occur but in the fact that some information could cause harm. The Minister referred to animal rights activists, but I do not think that we have to stop there. Perhaps one needs only to think about anti-nuclear protestors if the Government give the go-ahead for new nuclear build. If one looks across the Atlantic, one can see violent, unlawful protest against, for example, abortion clinics. God forbid that that would ever come to this country but it is not beyond the bounds of possibility. It is extremely important that we get any amendment right here. We congratulate the Minister on AmendmentNo. 245B, in that it would allow non-disclosure where it would be seriously prejudicial to the interests of the other party to the contractual arrangements. We completely agree with that. But my AmendmentNo. 245C goes on to deal with two further issues. First, it would allow non-disclosure if it were seriously prejudicial to the company. The Minister will be aware that the CBI has expressed continuing concerns about this aspect of the Government’s own amendment. He sought to argue that the main problems would always be borne by the company on the other side of the contractual arrangements, but I do not believe that that would always be the case. For example, a quoted company could deal with an unquoted company which the animal rights activists know all about, but they might not know that it is dealing with a quoted company until the disclosure is forced—perhaps because there is one essential contract. The Minister’s amendment would give no comfort to those companies, which would have to reveal the first time that they were dealing with a company, such as Huntingdon Life Sciences, which was itself unquoted. The Minister has confined himself to trying to deal with the issue of animal rights activists and similar. Commercial considerations must also be protected. If, for example, a company has an essential supply contract with another company, revealing that could well reveal the source of that company’s competitive advantage, which would thereby give commercial information to its competitors and possibly to its foreign competitors. The amendment gives no protection to that kind of company. The Minister has pointed out that his amendment also allows nondisclosure only if the second test of public interest is met. I am not sure that it is reasonable to expect directors to weigh public interest in deciding whether to disclose. I can think of no other instance in company reporting that is qualified in this way. It is far from clear what public interest means in this context and perhaps the amendment tabled by the noble Lord, Lord Razzall, becomes more important as regards understanding the words in these amendments. It is not clear whether public interest applies only where potential criminal activity is involved or whether it could also apply where there was some commercial interest and, if so, whether that could be calibrated only at the level of UK plc or whether there is some public interest in the commercial health of other companies. It is very unclear. The Minister has offered some explanation, but I do not think it has gone far enough to give a clear understanding of what is involved to anyone in the reporting community. My amendment leaves the public interest wording there. I do not know what it means but it is there as an alternative and not as an essential test. Through my amendment, I do not wish to open the doorway to those who unlawfully wish to disregard the legitimate disclosure requirements that the Government now wish to create. However, we need to weigh in the balance the very real need to protect British companies against possibly harmful effects from disclosure and against the benefits that others certainly see. It is not clear-cut and it is a balance. Moved, as an amendment to AmendmentNo. 245B in lieu, Amendment No. 245C.—(Baroness Noakes.)