Company Law Reform Bill [HL]

moved Amendment No. 373:"Page 248, line 31, after ““company”” insert ““occurring in the course of the audit of accounts””" The noble and learned Lord said: My Lords, I will also speak to the nine other government amendments to chapter 6 of Part 16. When we discussed this in Committee, I agreed that we would take these provisions away. We believe that, together, the amendments clarify and improve the provisions on auditors’ liability. They will both meet the concerns that were expressed in Committee and achieve the effects intended by the other 13 amendments to this chapter. For the record, the other government amendments that I need to speak to are Amendments Nos. 374 and 375, 379 to 381, 387, 391, 392 and 394. I will also speak to Amendments Nos. 376 to 378, 382 to 386, 388 to 390 and 393, and in due course Amendment No. 391A, which is grouped with them. The main changes intended by the government amendments are these. In the new clause to be inserted after Clause 522 by Amendment No. 380, subsection (4) would make it clear that liability limitation agreements can be expressed in any way and are not—as some feared might be the case, based on earlier wording—restricted to being expressed as pure monetary amounts or such amounts expressed with reference to a formula. Amendment No. 391 clarifies that, when the court is considering what is ““fair and reasonable””, it should not take into account,"““the possibility of recovering compensation from””," any other people involved, nor any other,"““matters arising after the loss or damage . . . has been incurred””." I hope your Lordships will agree that those two changes improve the drafting of how these clauses achieve the intended policy objective. Noble Lords had raised a number of concerns about possible misinterpretation of the text, so we thought it best to try and put that beyond doubt. In addition, subsections (2) and (3) of the new clause inserted by Amendment No. 380 introduce a new power for the Secretary of State to make regulations about how liability limitation agreements are expressed. I should explain why we propose to bring that in. It has been suggested to us, mainly by the mid-tier accountancy firms, if I may so describe them, that there is a risk of liability limitations developing in a way that would damage competition in the audit market—particularly if limitations are expressed as fixed monetary amounts. While we would not expect liability limitations to have that effect on the market, we have thought it prudent to take this power so as to be able to respond if there should be problems. In that way, it would enable us to bring forward regulations that either prescribe what sort of provisions must be included in agreements, or specify provisions which must not be so included. There are a number of more minor improvements in the drafting of these provisions that I will be happy to explain in detail if necessary. Meanwhile, I beg to move.