Company Law Reform Bill [HL]

My Lords, it is unfortunate that the noble Lord should speak for all shareholders in that way. Some shareholders may wish to access these documents and find them interesting—most may not—but the provision is about giving them the opportunity. I can understand that auditors and directors who at present do not have to think about others reading the letter may have some reservations, but they should not do so. I cannot see any issue of commercial confidentiality between the directors and the auditors. After all, it is on behalf of the members and not of the directors that the audit is conducted. We would not want to impose unreasonable costs on companies in pursuit of this transparency, and we would consider this very carefully before making any order under this clause. We would be unlikely to apply it to small companies, where the benefits would be fewer and the costs could well be greater, certainly in proportion to the scale of the business. However, for large, quoted companies, there will have been an electronic version of the engagement letter on a website. The cost is minimal. I ask noble Lords to agree in principle that we should be able to require the disclosure of audit engagement letters when the benefits outweigh the costs. If we agree that principle, it is entirely appropriate that the details should in practice be decided by secondary legislation, subject to negative resolution. This justification for the procedure was included in our memorandum to the Delegated Powers Committee, which accepted it. I can understand that there may be opposition to this new transparency, particularly from auditors and some of their client companies, but we are not proposing it for their benefit. It is the shareholders and investors on whose behalf the audit is being conducted who stand to benefit. However, I look forward to receiving the noble Lord’s copy of the engagement letter and will study it diligently.