Clause 117 - Offences by bodies corporate

Enterprise Bill – in a Public Bill Committee am 5:00 pm ar 1 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster 5:00, 1 Mai 2002

I beg to move amendment No. 297, in page 84, line 3, leave out

''or to be attributable to any neglect on the part of''.

The provision on offences by bodies corporate seems to mirror section 132 of the Fair Trading Act 1973. As is often the case with provisions in legislation, it is a clear example of a chunk that has been moved from one piece of legislation straight to another, albeit from the depths of time, 29 years ago, as the Minister pointed out, which is almost before his time—almost before many of our times.

As is shown in the amendment, our concern is with the idea that negligence alone should be enough. We are keen to delete the wording:

''or to be attributable to any neglect on the part of''

particular individuals from subsection (1). Our concerns are not the same as those expressed when we discussed negligence in relation to cartels, when the Minister's colleague the Under-Secretary was here. In that case, there is a criminal offence and the possibility of going to prison for five years. We are not in criminal territory with the mergers in part 3.

However, the offences are serious. No doubt, in the scheme of things, officers of companies may find themselves under threat of disqualification if they are company directors and subject to quite large fines. We are therefore concerned to include a sense of intent, rather than purely negligence or recklessness. I would be interested to have some guidance and perhaps some examples from the Minister, on where he thinks that negligence and recklessness would and should be enough for an officer of a company to fall foul of the provisions.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

I am inclined to support the amendment. The clause seems to be exceptionally wide, in that much is attributable to any neglect. If the wording were changed to ''gross'' or ''culpable'' neglect, I could see that there might be some force in it, but the present, wide, drafting leaves me with some concerns about the wide range of activities that might be encompassed.

I am always mindful when dealing with such situations of my one outside directorship. I am a director of Aberdeenshire Women's Aid. I fully accept that that organisation is not likely to fall under the ambit of part 3 but, then again, we live in a funny old world and we just never know.

One can well imagine relevant circumstances involving people in partnerships. The Minister has a similar background to mine and may remember some of the prosecutions for cashier fraud undertaken by Aberdeen legal firms in the not-so-distant past. In such cases, there may have been a substantial degree of neglect, but nothing that would justify bringing proceedings against partners under the provision. I would be interested to hear the Minister explain why it is thought necessary to define the range of culpability as widely as has been done.

Photo of Douglas Alexander Douglas Alexander Minister of State (e-Commerce & Competitiveness) 5:15, 1 Mai 2002

In the hon. Gentleman's absence last week, when I first attended the Committee, there was an interesting discussion about businesses in Orkney and Shetland. I understand that he was obliged to travel back to his constituency early. There was an amusing exchange across the Floor of the Committee about how many businesses in Orkney had a turnover of £45 million. Much as I am delighted that the Scottish Executive, under a joint Labour and Liberal Democrat Administration, have provided additional funding for women's legal aid and refuge centres in Scotland, I would be very surprised if the level of funding for the body of which he speaks would bring it anywhere near the de minimis requirements for the provision.

The hon. Gentleman raises the serious point of whether the description of negligence in the clause is too widely drawn. I am constrained by the fact that my background is in delict rather than tort, but I can offer the comfort that the clause is long-standing, as the hon. Member for Cities of London and Westminster (Mr. Field) was generous enough to acknowledge. It is a common provision in both existing and previous legislation. However, it would not be appropriate or right for the Committee to send the message that negligence does not matter and that company directors should not be held accountable for what information is brought before the relevant authorities.

It is critical that we take an amicable and proactive approach to the resolution of the matters that we discussed in Committee this morning and that there should be appropriate checks on directors to ensure that the information furnished to relevant bodies is appropriate and right. The provision is not a significant departure from that in other legislation that has been passed by the House. It is right that officers of companies should be liable to prosecution by a body corporate for an offence directly attributable to the director. I urge the hon. Member for Cities of London and Westminster to withdraw the amendment.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

We are still uncomfortable with the provision. The issue of negligence affects the Bill in a small way, but I think that that issue will come up increasingly frequently in Department of Trade and Industry and Treasury Bills in the next few years. Both the City of London and general corporate law are at a crossroads in relation to ethics and other such issues. More responsibilities are being heaped on directors—and, indeed, more junior employees—of companies.

One need only consider what happened recently with Arthur Andersen and Enron. Clearly, fraud was also involved in that case, but as the hon. Member for Orkney and Shetland rightly pointed out, the massive majority of the equity partners of Andersen world wide were entirely ignorant about the matter and found themselves in dire straits. There will have to be a recalibration of neglect as opposed to criminality, and of the way in which people, particularly company officials, can protect themselves if such relatively draconian measures are forced on to the statute book. Clearly, I shall not win the battle in

Committee today, but I would like to flag up the issue as one that will need to be discussed further.

Photo of Douglas Alexander Douglas Alexander Minister of State (e-Commerce & Competitiveness)

I merely highlight the fact that DTI Ministers have the company law review before them and we are considering a wider range of those issues. I am certainly cognisant of the points that the hon. Gentleman makes and will bear them in mind during those deliberations.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I thank the Minister. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 117 ordered to stand part of the Bill.

Clauses 118 to 122 ordered to stand part of the Bill.