I thank you, Mr. Stevenson, for being prepared to act as Chairman. Bearing in mind the alternative attraction this afternoon, I am sure that all hon. Members will wish to be brief, and that we will not press you to exercise your responsibilities with any great vigour. I also express my appreciation to those hon. Members who have been able to attend this afternoon.

I propose new clause 1 as a substitute for clause 1. I remind the Committee that the purpose of clause 1 was to permit a voluntary asset lock on the four community benefit societies. It is voluntary in the sense, first, that it would allow new societies to pass a rule locking their assets; and, secondly, that it would allow existing societies to present that option to their members, should they so wish. The provision was meant to ensure that assets could not be used except for the benefit of the community for which the society was originally established, but it would allow the transfer of those assets to another society with a similar purpose and a similar rule.

It was recognised that clause 1 required redrafting in order to enable the Treasury to act through secondary legislation. The proposed new clause sets out the issues on which the Treasury would consult, and the constraints on the freedom of the Treasury to decide to legislate on the matter. It is not possible for the Bill to cover every aspect of the asset locks, as consultation will clearly be required first. However, although the Financial Services Authority will not register a community benefit society unless it has an asset lock in its constitution, it was recognised that

that was not a watertight position and that a community benefit society could choose to convert into a company and then use the assets for whatever benefit it wished, including for the benefit of members of the society.

The strategy unit report that was mentioned on Second Reading referred to the importance of providing security to those wishing to establish community benefit societies, for whatever purpose. It is critical that the asset lock should not impede the efficient running of the society or prevent democratic decisions being made allowing alteration to the means of fulfilling the society's goal—for example, through a merger with another society.

Subsection (1) of the new clause will enable regulations to be made to define which societies can adopt a lock-in, and allow a choice in the scope of assets that can be locked. Community benefit societies vary widely, as we heard on Second Reading, and it may be that, after consultation, asset locks may be judged inappropriate in some circumstances, either in terms of the type of society or the form of assets that it holds.

Subsection (2) allows for flexibility in regulations to define the purposes for which assets may be locked. In my view, it is unlikely that the differentiation will be applied. It is for societies to define their purposes and, if they agree that an asset is locked, to lock it into that purpose. In any case, the purpose would have been scrutinised by the regulator on the establishment of the society. However, it is possible to conceive of circumstances in which a purpose has become so redundant that external guidance is required in relation to an asset transfer. Subsection (2) would facilitate that process.

Subsection (3) is self-explanatory. Subsection (4) sets out the framework for a potential lock-in. Just one element requires further explanation. As existing societies will be allowed to adopt a lock-in resolution, it will be necessary to consider, during the consultation process and in the formulation of any subsequent regulation, whether any member who disagreed with the resolution and assumed his or her entitlement to a proportion of any future break-up value of the society, following its conversion to a company, might require compensation for that loss of a notional asset. He or she would be an extremely far-sighted member, but I suppose that the situation is hypothetically possible. The new clause deals with the need to consult on such matters during the process, which will be led by the Treasury.

Another point worth considering is that the reference to prescribed persons correctly implies that the Treasury may choose to place the regulatory function for the process in new hands, not with the FSA or another existing body. That is a reasonable aspect for further discussion. If, as the strategy unit report suggests, lack of an asset lock is a serious barrier to the use of community benefit society models, one might expect their wider adoption. If that were the case, a new regulatory function might be appropriate. Of course, it might also be appropriate for there to be no regulatory body to carry out that function, but I

would imagine that people would be able to submit that opinion in any consultation process.

I have explained the key features of new clause 1.