HOUSE OF COMMONS
Fifth Standing Committee on Statutory Instruments, &c.
DRAFT COMPANIES (DISCLOSURE OF INTERESTS IN SHARES) (ORDERS IMPOSING RESTRICTIONS ON SHARES) REGULATIONS 1991
Wednesday 10 July 1991
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The Committee consisted of the following Members:
Chairman: Mr. Geoffrey Lofthouse
Carlile, Mr. Alex (Montgomery)
Davis, Mr. David (Boothferry)
Fishburn, Mr. Dudley (Kensington)
Hughes, Mr. Robert G. (Harrow, West)
Lee, Mr. John (Pendle)
Madel, Mr. David (Bedfordshire, South-West)
Mitchell, Mr. Austin (Great Grimsby)
Mowlam, Ms. Marjorie (Redcar)
Nellist, Mr. Dave (Coventry, South-East)
Pawsey, Mr. James (Rugby and Kenilworth)
Redwood, Mr. John (Minister for Corporate Affairs)
Ross, Mr. Ernie (Dundee, West)
Shepherd, Mr. Richard (Aldridge-Brownhills)
Spicer, Sir Jim (Dorset, West)
Stanbrook, Mr. Ivor (Orpington)
Stern, Mr. Michael (Bristol, North-West)
Turner, Mr. Dennis (Wolverhampton, South-East)
Wardell, Mr. Gareth (Gower)
Young, Mr. David (Bolton, South-East)
Mr. F. A. Cranmer, Committee Clerk2 3 Fifth Standing Committee on Statutory Instruments, &c. Wednesday 10 July 1991
[MR. GEOFFREY LOFFHOUSE in the Chair]
The Minister for Corporate Affairs (Mr. John Redwood): I beg to move, That the Committee has considered the draft Companies (Disclosure of Interests in Shares) (Orders imposing restrictions on shares) Regulations 1991. The regulations are proposed under section 135 of the Companies Act 1989. At present, a court or the Secretary of State for Trade and Industry can make a freezing order to prevent the transfer of shares, the receipt of dividends, or the exercise of voting rights in respect of holdings where there are problems as defined by legislation. The regulations will provide additional flexibility, so that a freezing order need not have an adverse effect on third parties who are in some way involved with the shares but who do not necessarily own them. The regulations are not contentious.
Ms. Marjorie Mowlam (Redcar): The Opposition welcome the regulations and agree that they are not contentious. They define the powers of the courts to deal with malpractice.
Mr. Tim Smith (Beaconsfield): It is important that when Parliament empowers the Government to change primary legislation by statutory instrument, the exercise of that power should he properly scrutinised. I was a member of the Standing Committee that considered the Companies Act 1989. That Committee seriously considered the important issue of ensuring that when one company, which could be a potential predator, takes a stake in another company, the company in which the stake is taken should be able to discover quickly and easily the identity of the beneficial shareholder. The 1989 Act considerably strengthened the provisions of the Companies Act 1985, but it was left that the legislation could be changed by regulations. As I recall, three aspects of the primary legislation could be 4 changed and we are dealing with two of them today. Does my hon. Friend the Minister expect that we shall deal with the third aspect? It causes problems for practitioners if primary legislation is changed regularly by statutory instruments. As it is, the 1985 Act must be read in conjunction with the 1989 Act, and now it will have to be read in conjunction with the regulations. I am not sure whether other regulations have been made in respect of the 1989 Act, or whether others are proposed. Will my hon. Friend the Minister comment on that, and say whether we can expect a consolidating Act to be introduced in due course?
Mr. Redwood: I am grateful to my hon. Friend the Member for Beaconsfield (Mr. Smith) for stressing the importance of being able to discover the identity of the beneficial owner of an interest in shares. My hon. Friend is right in thinking that the Committee and Parliament agreed that was important, and the provisions were strengthened by the 1989 legislation. It was clear at that time that further work would be required in respect of the matters covered by the draft regulations. It was pointed out that the Government should consult a number of interests in the legal profession, to ensure the correctness of the wording of the regulations and that the issue had been covered in the right way. That was done, and the result is before the Committee today in the form that I think will work. When the Companies Act 1989 was enacted, Parliament was aware that subsequent regulations would be necessary. That was clear to everyone involved in the relevant debates. We have not finished making regulations under the 1989 Act, as more work is necessary to bring into effect some of the provisions of earlier legislation. However, I have no plans to introduce further regulations before the summer recess. It will be necessary to read the Act in conjunction with the regulations—of which there will be several, owing to the complexity of the matter. From time to time, the Government review whether it is necessary to consolidate the Act. We have no plans to do that yet although it might become necessary eventually.
Question put and agreed to.
Resolved, That the Committee has considered that draft Companies (Disclosure of Interests in Shares) (Orders imposing restrictions on shares) Regulations 1991.
Committee rose at twenty-five minutes to Eleven o'clock.5
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Lofthouse, Mr. Geoffrey (Chairman)
Davis, Mr. David
Hughes, Mr. Robert G.
Shepherd, Mr. Richard
The following also attended, pursuant to Standing Order No. 101(2):
Smith, Mr. Tim (Beaconsfield)6