77. The draft legislation published in September 1998 consists of a draft Bill of 7 pages, containing 17 clauses, preceded by brief explanatory notes: and draft Regulations, comprising 15 pages of 8 draft regulations, followed by 60 pages of schedules to the Regulations. The Bill is largely concerned with the grant of powers to the Secretary of State to make regulations — 29 such grants according to DTI.[132] The Regulations provide detailed rules on incorporation and reports to the registrar; but their meat is in a series of schedules dealing with the proposed requirements for regulatory bodies, and the application to LLPs of companies and insolvency legislation. Two principal criticisms can be and have been made of proceeding in this way —

  (i)  that legislation by reference to other legislation, by application or disapplication of specified provisions, or by modifying the way in which legislation is to apply, is confusing, difficult to follow, and unfriendly to users, compared to the evident alternative of a comprehensive "stand-alone" LLP statute:

  (ii)  that confining much of the all-important detail of the legislation to regulations avoids proper parliamentary scrutiny and effectively rules out amendment by Parliament of the details of the proposed framework.

We have considerable sympathy with both objections.

78. The complaints about the extent of legislation by reference have come from many sources, but in particular from those bodies representing accountants who may well be advising small firms, such as existing partnerships, on the potential implications of a change in status. ACCA, for example, suggested that small firms would find it necessary "to seek legal advice on fairly straightforward points lest they should misinterpret the legislation", leading to cost.[133] The LCSA considered that there would be significant costs in smaller firms unfamiliar with the Companies Act in understanding the legislation.[134] ICAS feared that the structure would not make the legislation "accessible and understandable to users".[135] ICSA described the legislation as "cobbled together", making it "extremely complicated to interpret".[136] Professor Morse of the University of Nottingham suggested that a similar drafting technique applied in relation to the Insolvent Partnership Regulations had "failed dismally".[137] Some of the evident mistakes and omissions in the draft Regulations can reasonably be attributed to this manner of legislation, as can the uncertainty among many respondents as to exactly what is being proposed.

79. In response to these complaints, it must be noted that —

  (i)  the alternative of setting out in extenso all the statutory provisions applying to an LLP would result in a paper of many hundreds of pages, much of it reproducing existing statute:

  (ii)  if there is demand — as there is likely to be — for a stand-alone LLP statute, commercial publishers can readily provide such a document:[138]

  (iii)  legislation by reference may facilitate application to LLPs of subsequent changes in companies and insolvency legislation.[139]

Lawyers and accountants can be assumed to have a reasonable degree of familiarity with the content and layout of the Companies and Insolvency Acts, so that the problems of discovering if and how a provision applies to LLPs may be more apparent than real. Both the Law Society and the APP — admittedly expert practitioners — accept that, while a stand-alone statute might have been desirable, the way ahead as proposed will be workable.[140]

80. The division between the draft Bill and draft Regulations has no obvious logic: for example, Clauses 3 and 4 and Regulation 3, on incorporation, cover broadly similar territory in similar detail. There does not at first sight seem to be any overriding reason why the Regulations and schedules should not be incorporated into the Bill. The reasons given include —

  (i)  ease of subsequent amendment: the Bill however already provides powers, which could if necessary be expanded, to amend legislation by regulation:

  (ii)  parliamentary time constraints: the amount of time to be devoted to scrutiny of legislation is proportionate not however to the length of a Bill, but to its complexity, significance and political weight:

  (iii)  precedent: while we do not doubt that there are more than enough recent precedents under Governments of all hues for brief primary legislation being used to provide powers to make extensive secondary legislation,[141] we by no means accept that these are to be regarded as precedents to be followed.

81. The only persuasive argument in favour of retaining the currently proposed division between primary and secondary legislation is the perceived degree of urgency in introduction of the legislation. The schedules will have had to be revised in some detail in light of the number of expert comments and criticisms made in response to the consultation. If the schedules were part of the primary legislation rather than secondary legislation, further amendment might be required during the passage of the Bill. Based on past experience this will be at the latest possible opportunity, which in practice offers poor opportunities for Parliamentary input. It may be that waiting for a more or less agreed revision of the schedules could delay introduction of a Bill by several months. We can understand that one course of action which might commend itself to the Department would be to proceed with the speedy introduction of the Bill, while undertaking to give the revised draft — and if necessary revised drafts — of the Regulations appropriate public disclosure. The DTI assured us in oral evidence that they would do their best to ensure that their intentions would be "transparent to Parliament and indeed to the interested world".[142] This Committee would wish to examine such drafts. Sufficient time would have to be given for such examination before they are formally laid. Revised drafts of the proposed secondary legislation would have to be publicly available as soon as possible, and in sufficient time to enable outside bodies to offer further comment, and for this Committee to examine them.

82. We would however far prefer that the detailed secondary legislation proposed be incorporated in the Bill. The consultation period closed three months ago. That should in our view have given ample time for the necessary discussions to have taken place and for the revisions to have been made to the schedules. It may be that some extra time is needed; but we have heard nothing to suggest that the Bill is so urgent as not to permit of a delay of a few months in its introduction. Time was indeed lost in the first half of 1998. It may also be that it would be a suitable Bill for the proposed new carryover procedures, since there is no suggestion that it is likely to meet any major opposition in principle. If Ministers wish to maintain the present split between primary and secondary legislation for reasons of the time required for the preparation of the latter, they will have to explain to Parliament the nature and origin of the deadlines to which they are working for Royal Assent and implementation. They will have to be very persuasive to justify the extensive use of secondary legislation as proposed.

133  Qq124-6: Ev, p56, 1 Back

134  1998, p2 Back

135  1998, 2.1 Back

136  1998, p1 Back

137  1998, 14, 2 Back

138  See eg Q125, Q187 Back

139  Eg Q23 Back

140  Ev, pp18-19 & Qq62-64: Qq187ff Back

141  SeeQq6ff Back

142  Q6 Back