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Lord McKenzie of Luton: I am aware of the comments of the institute on this matter—I read its submission—but I see no need for us to provide an obligation for a review of the sections mentioned in the proposed new clause. Of course, we try to keep all the Companies Acts under review. If there are problems, we will investigate them more closely and take steps to remedy them if appropriate. Clauses 497 to 510 are as soundly based as the rest of the Bill. They will be improved in a number of ways following our discussion today and further minor improvements may be made at later stages. Many of the provisions are simple restatements of the existing law—for example, on removal and resignation of auditors—and much of the new material, particularly on auditor resignation statements, is based on the audit directive that will be adopted shortly. It would not therefore be appropriate to single out these sections for obligatory review, notwithstanding the tempting offer of a power to make amendments by order.
Baroness Noakes: I thank the Minister for that reply. I will revert to the Institute of Chartered Accountants when we have had an opportunity to read in Hansard what the Minister said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 511 [Effect of casual vacancies]:
Baroness Noakes moved Amendment No. 334CA:
Page 244, line 24, leave out from beginning to ", any" and insert "If an auditor ceases to hold office for any reason"
The noble Baroness said: The amendment is intended to make some sense of Clause 511. The clause states:
"During a casual vacancy in the office of auditor, any surviving or continuing auditor or auditors may continue to act".
However, if there are surviving or continuing auditors, how can there be a vacancy, casual or otherwise? What is meant by the term "casual"? The clause would be more naturally drafted as follows:
"If an auditor ceases to hold office for any reason, any surviving or continuing auditor or auditors may continue to act".
That is what Amendment No. 334CA would do. I am aware that the wording goes back a long way in company law, but we are entitled to challenge whether the wording in the Bill before us is appropriate or effective in today's world. I beg to move.
Lord McKenzie of Luton: Clause 551 deals with casual vacancies in the office of auditor. If there have been joint auditors, any surviving or continuing auditor or auditors may continue to act. As was explained, Amendment No. 334CA would do away with the phrase "casual vacancy". I have listened to the explanation of the suggested replacement—so my notes say—but I am not convinced. There is no
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ambiguity in the phrase "casual vacancy". It appears in the existing Act, as well as in Clauses 152(3), 470(3)(c) and 475(3)(c). We can and should retain it in the Bill. If it were to give rise to a degree of uncertainty, which we have not recognised, our view might be different, but it is an existing term which, so far as I am aware, has not generated any difficulties in its current application.
Baroness Noakes: But if there are surviving or continuing auditors, how can there be a vacancy?
Lord McKenzie of Luton: If the auditors have been appointed jointly and one of them ceases to be a part of that appointment, it would constitute a vacancy.
Baroness Noakes: I suggest to the Minister that there is no vacancy; there are auditors to the company. Whether a company chooses to appoint joint auditors is a matter of choice, but there is no vacancy when that occurs.
Lord McKenzie of Luton: I reiterate, if auditors are appointed jointly and one of them ceases to part of that appointment, it could reasonably be described as a casual vacancy, but I understand the point that the noble Baroness is pressing.
Baroness Noakes: I will not pursue this point today, although we could have a lot of fun with it. I think that the Minister is wrong. I will return to the City lawyers who raised this matter with me and ask them for their views in the light of the Minister's response. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 512 [Members' power to require website publication of audit concerns]:
Lord Sainsbury of Turville moved Amendment No. 334CB:
On Question, amendment agreed to.
5.45 pm
Baroness Noakes had given notice of her intention to move Amendment No. 334D:
Page 245, line 5, leave out from "company" to the end of line 6 and insert "of which the average market value, per member, is at least £1,000 on the day on which the company has first received sufficient requests to satisfy the requirements of this subsection"
The noble Baroness said: I shall refer to the amendment only briefly. It duplicates in substance Amendment No. 300QC which my noble friend Lord Hodgson moved on 1 March and was about how to express trigger points for members representing a certain amount of share capital. This amendment has precisely the same aim as the one the Minister so misguidedly rejected when my noble friend moved it. In view of his rejection at that stage, we believed that we would return to it for all of the relevant clauses of the Bill. I shall not weary the Committee by repeating
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the argument today or further refuting the unsatisfactory answers given by the Minister before. I shall not move the amendment.
[Amendment No. 334D not moved.]
Baroness Noakes moved Amendment No. 334E:
The noble Baroness said: I shall move Amendment No. 334E and speak also to Amendments Nos. 334F and 334G which are in this group.
Clause 512 contains new powers for members to raise audit concerns. The issue is primarily how small shareholders can engage with companies in which they have invested. If large shareholders have concerns, there tend to be other forms of dialogue and avenues for inquiry other than the annual accounts meetings that are rarely attended by the larger shareholders. It is in that light that we have tabled the amendments in this group, which have been suggested by the UK Shareholders Association.
The UKSA is concerned that companies may use the threat of claiming that the rights are being abused to discourage requests for publication, because those making the requests might have to end up paying both sides' costs under subsection (6). For that reason Amendments Nos. 334E and 334G make it clear that the court has to be satisfied that the rights are being "seriously abused" before the court will agree to non-publication of the concerns under subsection (5) or before the court awards costs under subsection (6).
Lord Clinton-Davis: What is the noble Baroness's definition of the word "serious"?
The Deputy Chairman of Committees (Lord Geddes): With respect to the noble Lord, the amendment has not yet been moved. I think that the noble Lord will perhaps have an opportunity to intervene after the formal moving of the amendment.
Baroness Noakes: I am grateful to the Lord Chairman for that protection.
As I was explaining, by raising the barrier on the test that would make it harder for companies to threaten small shareholders effectively with picking up costs if they lost, Amendment No. 334F goes further and deletes subsection (6) and with it the possibility that shareholders could end up paying the company's costs at all.
I fully understand that there is a balance to be struck between the company, which does not want to be exposed to vexatious website activity, and creating a natural outlet for shareholder activism when shareholders have reasonable concerns that should be aired. We think that the balance is not quite right in the Bill. I hope the Minister will look again at this area and look on these amendments favourably. I beg to move.
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