Company Law Reform Bill [HL]

moved Amendment No. 56:"Page 52, line 26, leave out ““not”” and insert ““being””" The noble Lord said: My Lords, we have had a comfortable run in through the first clauses of the Bill, but this group of amendments takes us to rather more controversial matters. In moving Amendment No. 56, I shall speak also to Amendments Nos. 57 and 58 to Clause 116 of the Bill which concerns the rights to inspect a shareholders’ register and request copies of it. The noble Baroness, Lady Murphy, spoke about this issue in Grand Committee. We were pleased to support her then and I am grateful for her continuing interest and support today. There has been much public interest in this area. We note the letter in the Financial Times on 4 May which explains graphically the use to which share registers are being put under the current law—in this case, a vulnerability to ““boiler rooms””. The letter, which is from Mr Christopher Pearson, company secretary at Balfour Beatty states:"““A number of our shareholders . . . have been telephoned over the past few months by the organisation in question, claiming to be connected with us, and offered some dubious ‘opportunities’ to buy shares . . . As a result, we have been forced to circulate all our shareholders with an appropriate warning””." The letter continues:"““I know that we are not the only company that has been put in this position””," a fact that is borne out by a subsequent article in the Financial Times on 6 May which lists Diageo, Close Brothers, GlaxoSmithKline, MFI and Majestic as some of those other companies. Indeed, today’s Financial Times leads on the whole story with GSK saying that investors are being targeted by extremists. By introducing the provisions to allow companies to refuse access to the register, the Bill goes some way towards tackling the problem. However, there remain concerns over the exact formulation of these provisions and their effectiveness at preventing this mischief in a broader context. The thrust of our amendment is to give some guidance as to when companies can legitimately refuse to give access to the register of members. As I have said, these are new powers and, as such, there is no precedent on which companies, the public or the courts can rely. This is not eased by the current drafting of the Bill, which states that the court must be satisfied that the register is,"““not sought for a proper purpose””" A number of questions clearly arise out of this—the biggest of which is what is ““a proper purpose””? Without clearer guidance on this matter in primary legislation, we may well be left with a situation where, on the one hand, unscrupulous companies could limit or delay access to the register by repeatedly appealing to the court to seek approval not to disclose the information. On the other hand, we could see companies not wishing to risk the expense of the court process to protect a few names on the register when they are uncertain that they will get the approval that they seek. As a result, they expose their members unnecessarily to precisely the danger that this provision is intended to prevent. Our amendment would redefine this power to refuse access to the register, focusing on the words ““improper purpose””. As a further guidance to the courts, we have also stated a purpose that will be regarded as improper—one that,"““is likely to lead to harassment or intimidation of members””." That is not an exclusive list and it leaves it open to the courts to rule on other purposes as being either proper or improper, but it goes further than the current drafting, which offers no guidance at all. The Minister will notice that the shape of our amendment has changed since Grand Committee when he had difficulty accepting the second part, which included in the definition of ““improper””,"““the promotion of goods or services not related directly to the business of the company””." As he said in Grand Committee on 1 February,"““but the second does not, I consider, achieve her purpose. The promotion of widgets is not, I believe, a proper purpose for permitting access to the register of members of a company manufacturing widgets, and yet, under the noble Baroness’s amendment””—" the amendment of the noble Baroness, Lady Murphy—"““the court would have no discretion to relieve the company from its obligation to permit access to an applicant wishing to use the register as a mailing list to promote such widgets””.—[Official Report, 1/2/06; col. GC 150.]" This appeared to be a major obstacle to the meeting of minds that day, so we have taken the amendment away and reconsidered it. On reflection, we see the force of the Minister’s arguments and have removed that part of our amendment. We introduce this amendment in the hope that the Government will now find that they agree sufficiently to be able to accept it. There is a wider issue here that is not directly addressed by the amendment and to which I alluded in Grand Committee. How can members prevent access to their details, by the menaces that this provision speaks to prevent, and ensure that their information cannot be found via other avenues—at Companies House, for example? If that is not addressed in some way by the Government, we may find ourselves plugging a hole here in the Company Law Reform Bill only to find the water rising over the top of the dam in another place. I hope that the Government will consider this wider issue as well as the amendment. Not only did the Financial Times lead today on it, but The Times itself wrote a further article about planned law against extremists being useless. This is an important issue which is a matter of great public concern. I beg to move.