Company Law Reform Bill [HL]

My Lords, in Grand Committee we considered at length the implications of the proposed abolition of the requirement for private companies to have a secretary. No one suggested that the requirement should be retained. However, many noble Lords made clear their concerns about certain implications of the proposal, in particular that there would be no statutory recognition of a private company secretary and that third parties would not be able to discover whether a private company had a secretary and, if so, who that secretary was. At present the identity of the company secretary of a private company—as, indeed, that of a public company—is a matter of public record, starting with the statement of proposed officers on a company’s formation. Thus, third parties can discover who is the secretary of any company. This is of particular importance whenever the signature of the secretary, as secretary, has legal effect. Under the Bill, private companies will still be able to have a company secretary, but whether they so choose will not be material to third parties. That is why the Bill does not provide for them to have statutory recognition nor for their identity to be on the public record, either on formation of the company or thereafter. However, in Grand Committee, several noble Lords were concerned about the consequent loss of flexibility for private companies when executing documents. At present, the alternative to affixing the company’s seal is signature by either two directors or a director and a secretary. Under the Bill, both these possibilities are retained for public companies only. It also provides that for any company, if witnessed, the signature of a single director is sufficient. A crucial difference between the world under the Bill and the present for a private company is that the company secretary and the director must be together if their combined signatures are to be used to execute the document while at present they can sign separately. Of course, as now, a company will be able to appoint an attorney whose sole signature is sufficient for the execution of a document on the company’s behalf. We have given further consideration to this problem and have had useful discussions with the Law Society. The essential requirement for third parties is that the identity of those able to sign for the company be on the public record. We see considerable advantage to all companies, not just private companies, if they were able to give individuals authority for that purpose, whether or not the individual concerned is the company’s secretary. It would be essential that any such person’s identity be on the public record, which is why I brought up this possibility during our discussions of these amendments. The Government would like to consider these amendments further and therefore hope that noble Lords will not press for a vote upon them today.