Legal Services Bill [HL]

My Lords, I am happy to try to clarify this matter. I am not sure how it fits into what we are doing, but it is important to put it on the record, as the noble Lord said. We were considering an amendment to Clause 169, if noble Lords need to look back at that. That amendment sought to ensure that, in the context of ABS firms, lawyers’ duties to comply with their professional conduct obligations would override any other obligations, including their directors’ duties to shareholders. We have made it clear that an override provision is unnecessary as long as lawyers and licensed bodies have a statutory obligation to comply with their professional conduct rules. Those statutory obligations are contained in Clause 169 and are reinforced by Clause 88. They provide that non-lawyers in licensed alternative business structure companies or firms cannot do anything that causes or substantially contributes to a breach by lawyers or the licensed body of their professional conduct duties. The duties cannot be compromised by other obligations, just as companies and company employees have different kinds of statutory obligations and directors cannot cause breaches of those obligations in the name of their duties to shareholders. I understand the concern regarding directors’ duties to a company and its shareholders, yet we emphasise that those duties are intended to be cumulative with any other duties to which the director may be subject, not in conflict with them. The duties owed by directors in Part 10 of the 2006 Act do not require directors to break the law and could never form a defence to a breach of another legal obligation. Instead, they must be understood in the context of the wider legal framework. Section 172 of that Act, which requires directors to promote the success of the company for the benefit of the members as a whole, is flexible enough to allow for directors’ duties and the duties arising under other law to operate harmoniously without any need for specific provision in other legislation. As noble Lords will know, we have just completed a codification of company law, including directors’ duties, in the Companies Act 2006. The DTI is concerned that an override provision in relation to lawyers’ duties, such as that proposed by the noble Lord, would risk creating uncertainty in company law and other law to which companies are subject, because it would be unclear as to how directors’ duties would interact with regulatory obligations in areas other than legal services. In other words, the Companies Act recognises that in fulfilling their duties to shareholders, directors of companies must have the flexibility to have regard to a wide range of objectives and to act in furtherance of purposes other than the benefit of the company members, where applicable. It may be taken as read that directors are required to comply with other legal obligations. We do not wish to state that explicitly, because we risk negative inferences for other regulatory legislation. I am content with that explanation, which I am happy to ensure the noble Lord has in writing. I will also ensure that copies are placed in the Library of your Lordships’ House and sent to other noble Lords who have spoken on that amendment and on the Bill. It deals with the fact that there is not an issue of concern; rather, it explains why adding anything further to the Bill could create uncertainty, which I am sure the noble Lord does not want.