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Companies Bill [Lords]

The Bill is a more comprehensive version of the measure that was first presented to the Lords on 11 January this year. It is in three volumes rather than two and has 1,264 clauses instead of 885. It has broken many records along the way. One must be the 1,029 amendments that were pinged back to the Lords last week. The fact that only a few amendments have been ponged back to the Commons shows that they were mainly uncontentious. Indeed, most were needed to consolidate the Bill with company legislation from 1985, 1988 and 2004. We had called for such consolidation for four years. However, the harsh implications of the Government’s decision to implement that just before the second Chamber’s Report stage have been unfortunate for the legislative process. Despite a valiant and expert effort by the Bill team, we have a good example of how making law on the hoof is clearly unsatisfactory. I sincerely hope that the rush will not come back to haunt the Government. Without much pleasure, let me deal with amendments Nos. 245A and 245B. I shall begin by putting the debate in context. The business review was born of the Government’s cack-handed approach to the operating and financial review. When the Chancellor scrapped the OFR in November 2005, without consultation with the Department of Trade and Industry or Ministers, let alone any stakeholders, the Government left companies with a bill for the OFR preparations running into millions of pounds. The business review was introduced to fulfil the EU directive requirements. After much bungling by the Government, we reached a position that was broadly supported by the Government, business and the Conservative party. On Report, we discussed at length our commitment to encouraging companies to develop their corporate responsibility and we accept that the business review, with its requirements for listed companies to report on environmental and community issues, should play a role in that process. However, at the last moment, namely two days before the final debate of the final parliamentary stage, the Government tabled amendment No. 822, which required directors to provide"““information about persons with whom the company has contractual or other arrangements which are essential to the business of the company””." We were immediately contacted by numerous stakeholders, such as the Association of British Insurers, representing investors, the Institute of Directors, the British Chambers of Commerce, the Quoted Companies Alliance, the CBI, representing large and small companies and the Association of the British Pharmaceutical Industry, representing pharmaceutical companies. They all believed that, whatever the issue, such a method of making significant policy change was unacceptable. Let it not be forgotten that the Bill has been eight years in the making and the business review provisions had been agreed after months of significant debate. To throw that aside by tabling the amendment, with one and a half day’s notice was, to stakeholders, let alone Opposition parties, staggeringly irresponsible. On Report, my hon. Friend the Member for Putney (Justine Greening), who is present in the Chamber, voiced the Opposition’s concerns about the broad scope of the amendment. She queried what the Government wanted companies to disclose, as the amendment was so vague that it provided little guidance on business reporting obligations. Stakeholders were already attempting to calculate the cost to companies in terms of compliance and related legal advice and guidance. The Government spin machine had stated that the provision would apply to suppliers. Clearly, however, it applies much more widely—to customers and possibly even to bank arrangements or arrangements with Government. Following Report, and amid the understandable storm of controversy over the Government’s actions, business representatives met the Government to discuss their concerns. We understand that the meeting did not provide much comfort. The Government stated that, at that stage, the amendment would not be changed. Due to the concern of stakeholders and the vagueness of the wording, and in the light of the Government’s intransigence, our noble Friends tabled an amendment to the provision, which introduced a caveat allowing directors to refrain from disclosing information that, in their opinion, would be seriously prejudicial to the interests of the company or other persons involved. We were therefore surprised to discover that, having told everyone that there would be no movement on the matter, the Government tabled their own amendment narrowing the scope to allow the omission of information about a person if, in the directors’ view, it would be seriously prejudicial to that person and contrary to the public interest. We support the position of our noble Friends that the provision should also apply to the company, and that the public interest element should be separated by replacing ““and”” with ““or””. The clarification provided by Lord Sainsbury on the Government amendment, and on our counter amendment, was welcome. I repeat, however, that it was all much too late. There has simply not been enough time to review how the provision will work in practice. For instance, can the Minister please advise the House how directors are expected to know what may or may not be in the public interest? Does the provision to omit information about a company apply equally to the holding company or subsidiary of the third party person with whom the company is contracting? We have practical problems with the wording as well as with the lack of consultation and we also have conceptual problems. If we look at the speeches on the matter in the other place, we see that Lord Sainsbury’s key point was that the amendment will not require lists of suppliers and customers to be provided. As he put it, the requirement would be for ““key relationships””, not ““exhaustive lists””. There seems to be some belief among non-governmental organisations and certain Members of both Houses, however, that the provision would provide full transparency. That is plainly not the case, and the Minister should comment on that. Anyone who thinks that the clause will lead to supermarkets having to disclose the suppliers of their 30,000 product ranges, as one Member mentioned in this place, is gravely mistaken. The provisions will affect not the large multinational but the small listed company with a smaller field of operation, whose key supplier or customer might have commercial sensitivity, which might mean that it does not want to disclose such contracts. In stock exchange listing rule terms, where such sensitivities exist on circulars, a discussion with the Financial Services Authority can allow the relevant documents not to be disclosed. In the Bill, however, the provision is a blunt instrument with no such flexibility.