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Pensions Bill

moved Amendment No. 130EZ: 130EZ: Before Clause 107, line 16, at end insert— ““( ) Regulations under this section may not make provision impeding a director in the discharge of his duty under section 172 of the Companies Act 2006 (c. 46) and may not make provision enabling a relevant notice to be issued to any person as a consequence of acts taken in accordance with that section.”” The noble Baroness said: In moving Amendment No. 130EZ, I shall also speak to Amendment No. 134ZBC. When the Pensions Act 2004 was passed, the Companies Act 2006 was still only a gleam in the eye of the then Department for Trade and Industry. At that time, directors’ duties were defined only by common law and could be summarised broadly as directors needing to act in the interests of the company. However, when the Government introduced what is now the Companies Act 2006, which I know the Minister remembers because we spent many happy weeks debating it in Committee and on Report, they deliberately chose to enact Section 172 of that Act, which restated the duties of directors of a company to line up with what the Government described as enlightened shareholder value. That section states that the duty of the directors is to act in the interests of, "““the success of the company for the benefit of the members as a whole””." It goes on to list matters to which the directors must have regard. That list is not exclusive, but it was intended at the time to reflect those major matters which the Government believed directors should have in mind when making decisions. That list refers to employees; that has been the law since 1987. It does not refer to former employees or to employees in their capacity as members of a pension scheme. Indeed, pension schemes are not mentioned at all in connection with the duties of directors. There is a concern that the proposed new powers of the regulator will skew what directors have to consider away from their core statutory duties, as set out in Section 172. Any changes to the current rules for the regulator’s powers will—as we have partly argued to date, and will argue during the rest of our consideration of the detailed amendments—be likely to lead to an increase in clearances, to which a lot of attention is being paid. They raise a danger for directors. Changes in the rules for contribution notices are much more likely to leave directors in the firing line. We will debate later whether the contribution notice should attach to individuals. It is inevitable that, if directors are sitting in the boardroom, trying to make decisions, and know that they will be in the firing line for contribution notices, which is a very serious issue in relation to transactions—which, under the proposed regulations, will be more broadly defined, and will shift from the current understanding—their core duties will become difficult to reconcile with what they have to take into account to meet this new environment. The Government will try to create this new environment if they get new regulation powers and pass regulations as they have broadly described them in their consultation document. The conventional advice that lawyers give to directors is that if they act in good faith, using their skills diligently, and ensure that they pay regard to the matters in Section 172, they will satisfy company law. When we come to the new powers and the use of the new powers proposed by Amendment No. 130EW, the Government have said that they wish to whisk away the defence of good faith. We are starting to see a bifurcation between how directors are told they should behave in order to satisfy company law, as enshrined in the Companies Act 2006, and what the regulator may require of them. As my noble friend Lord Lucas said in the context of the previous amendment, the liability of employers to pension schemes is becoming ever more like a super-preferential creditor. This has not been done via the Companies Act or the Insolvency Acts. It is, in effect, being done by the back door of pensions legislation. Is it the Government’s intention that the Pensions Act should override what is found in company legislation, especially company legislation that has been so recently enacted, without specific reference to pension schemes? Are they proposing giving pension schemes an order of protection that is different from that conferred generally by the rest of company law on the liabilities of creditors? On this subject, there is a slightly worrying misunderstanding about the nature of companies and company law which is linked and why I should like to raise it today. In the Government’s consultation document about the regulator’s powers, it states at paragraph 1.6: "““The Government also seeks to ensure that there is fairness between members and shareholders and other investors: if shareholders and investors would benefit when investments perform well, it is right for them to stand behind members’ benefits when times are harder””." This shows an astonishing lack of understanding of the difference between investors in a company and the company itself. It is the company itself that is typically the employer and to which all the powers of the Pensions Act relate, not the investors or members of that company. In the world of publicly listed companies, those listed on stock exchanges, there is no way that, say, an investor in year one who makes a profit and moves on would transfer some notional obligation of standing behind to an investor several transactions later in year five. Perhaps the Minister will explain what kind of ““standing behind”” referred to in the Government consultation was trying to get at. It seems to me that the Government are coming close to trying to lift the corporate veil with no thought of what impact that would have on capital markets. This is one of the areas in which those coming to the consultation document become concerned about the Government’s approach to corporate life in general. I turn to Amendment No. 134ZBC, which amends Section 100 of the Pensions Act 2004 to ensure that the regulator has regard to the interests of employers and associated parties when it exercises its regulatory powers. It seems that the Government intend to use the proposed new powers created by Amendment No. 130EW to enable the regulator to intervene in many more situations, either because a course of conduct is involved rather than individual acts or because a wider range of bodies can be considered for financial support, directions or contribution notices. It is therefore right that the regulator considers the widest possible effects of the exercise of its powers. If the regulator may be able to issue notices in a wider range of circumstances and to more people, there must be a quid pro quo that the regulator considers the effect of its actions on those affected. While these might appear to be covered by the statement in Section 100(2)(b) that, "““such persons as appear to the Regulator to be directly affected””," it is not absolutely clear that the regulator must include within that employers and associated parties. To date, the regulator has issued few notices and directions, but concerns have been expressed about the direction of travel indicated by the regulator. For example, the regulator’s consultation document on the clearance process issued last year took a number of positions which caused grave concern to employers. Having to have, "““regard to the effect on employers and others associated with the employer””," would be a useful safeguard and an important signal from the Government that they believe that employers are important in their own right and are not simply a chequebook to support pension schemes. I have raised a number of concerns about the interaction between pensions legislation and company law which are crystallised, although not entirely created, by what the Government are trying to do in Amendment No. 130EW. I beg to move.