Company Law Reform Bill [HL]

moved Amendment No. 6:"Page 6, line 1, leave out from beginning to second ““the””" The noble Lord said: My Lords, in moving Amendment No. 6, I wish to speak also to a long list of consequential amendments—Amendments Nos. 7, 11, 12, 28, 30 and 148 to 156 inclusive. These amendments concern a range of clauses beginning with Clause 13 and ending with Clause 259. We return to an issue that we discussed in Grand Committee. I am afraid that I did not find the Minister’s response persuasive and I want to have another crack at the matter this afternoon. As your Lordships will be aware, the Bill makes a big change to the current law concerning company secretaries. The current law is that all companies must have a secretary. The Bill, if passed as currently drafted, would change that and require only public companies to have a secretary, leaving private companies to decide themselves if they wish to have a secretary. These amendments do not concern the issue of where the line should be drawn between those companies required to have a secretary and those not so required. That is a matter which we shall debate when we reach Part 12 of the Bill. Instead these amendments deal with the situation under the Bill of those companies that are not required to have a secretary but which choose to have one anyway. The Bill quite properly re-enacts many of the powers and responsibilities that exist at present for secretaries where they are to be required by law; but, as currently drafted, the Bill does not make adequate provision for the empowerment of secretaries where they are not required by law. Our position on this is simple—where a company chooses to have a secretary, that secretary should be fully empowered to exercise all the functions and bear all the responsibilities of a legally required secretary. The amendments proposed in this grouping are designed to achieve that aim. To pinpoint a specific example where this is necessary we should look at Amendments Nos. 28 and 30 to Clause 44, which is headed, Execution of documents. These amendments would allow a company with a secretary, even if that is not required by law, to continue to be able to execute documents under the signature of the secretary and a director. This issue has attracted the interest of wider groups than those one might expect to be interested, such as the Institute of Chartered Secretaries and Administrators, and other groups, such as the Law Society, have raised concerns that the Bill as drafted is not satisfactory. When this issue was raised in Grand Committee, the noble Lord, Lord McKenzie, dismissed it as unnecessary, stating that the clause,"““introduces more flexibility for all companies, not less. It in no way hinders the execution of a document by a private company that chooses to continue to have a secretary””.—[Official Report, 30/1/06; col. GC41.]" However, I argue that that is not the case. Although a private company will continue to be able to authorise its company secretary to attest the affixing of its common seal, it will not retain the existing facility for a document to be executed under hand by a director and the secretary. It is true that a private company will be able under Clause 44(3) to execute a document by having it executed by a director whose signature is witnessed by another person who could be the secretary. However, we do not consider that that provides an acceptable alternative for the following reasons. First, under the current law, the director and the secretary can execute a document at different times, but that will not be possible for a private company under the new formulation. Secondly, we think it highly likely that private companies will continue to execute documents as they have been permitted to do since 31 July 1990, pursuant to Section 36A(4) of the Companies Act 1985, because they will be unaware of the change implicit in Clause 44. All the precedent books will be rendered out of date if the Bill proceeds in an unamended form. There would need to be wide publicity to bring this change to the attention of all companies affected by it. The change is likely to give rise to considerable confusion. In this respect we feel that Clause 44 is anything but deregulatory as it removes a facility for companies which exist under current law. The Bill as currently drafted retains the facility for public companies—that is, companies required to have a secretary—to execute documents under the signature of a director and the secretary of the company, or by two directors of the company. We see no reason why private companies—that is, companies not required to have a secretary—who choose to have a secretary should not be afforded the same facility. Indeed, not to allow this is likely to result in considerable confusion before this change to the law becomes known. In so far as the provisions of the first company law directive—which require the public register to contain particulars of the persons who are authorised to represent the company in dealings with third parties—would require the particulars of a company secretary to be included in the register of companies if he continues to have signatory powers in relation to deeds and other documents executed by the company, we propose that the Bill is amended to provide that where a company that is not required to have a secretary chooses to have one the particulars of that person should continue to be registrable. That is the rationale behind our Amendments Nos. 11 and 12. The other amendments seek to ensure that the correct frameworks are put in place for secretaries who have been appointed despite there being no obligation to do so. Amendments Nos. 6 and 7 would amend Clause 13, headed, Statement of proposed officers, to require any company that has a secretary to include that proposed secretary in the statement of proposed officers. Amendments Nos. 148 and 149 concern Clause 252, headed, Qualifications of secretaries of public companies. These amendments would make it clear that any company with a secretary must ensure that the secretary has the requisite knowledge and experience, but that only public companies would require secretaries to hold one or more of the qualifications stated in subsection (2) of that clause. Amendments Nos. 150 to 156 inclusive seek to amend Clauses 253 to 259 inclusive and would simply change the wording of the Bill to provide the appropriate powers for companies that have a secretary, despite not being required to do so. I beg to move.