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Companies Bill: Companies required to have at least one Director who is a natural person

17th October 2006

Supporting young entrepreneurs

Mr. Djanogly: First, I will address amendment No. 761. The suggestion is that if a company has only one director, not only should they be a natural person, but they should be domiciled in the UK. In the UK, we pride ourselves on being an international centre for conducting business. The amendment would be a backwards step and would fly in the face of London as an international community. It will not have the support of the Conservative party.

Government amendments Nos. 715, 716 and 717 deal with shadow directors. In Committee we explained the complex case law surrounding clause 168 and the difficulties in determining whether a person is a shadow director, including by making reference to the Ultraframe case of 2005. Hon. Members will be pleased, if not relieved, to hear that I do not intend to rerun that debate this evening. We recommended that the Government should recognise those complexities and remove the requirement for shadow directors' details to be entered on the relevant registers. In the light of that, the Government have reconsidered their position and tabled amendments Nos. 715, 716 and 717. That is welcome and we commend the Government on accepting our reasoned approach to this matter.

Clause 157, which relates to the minimum age for directors, is one of the more regressive clauses in the Bill. It provides that people must be 16 to become directors. The answer to my written question of 31 January revealed that on 31 December last year there were 431 directors under the age of 16 in England and Wales and that 200 were under 10. I can envisage circumstances in which controlling family companies or trust arrangements from wills drafted many years ago would require that a child be appointed a director and that not to do so would involve losing assets or causing problems in respect of inheritance. In Committee, I raised the question of whether the Secretary of State would make an exception under clause 157 in those circumstances, which involve an individual rather than some class basis of individuals. Unfortunately, I did not receive a full answer in Committee. Perhaps the Minister will provide one this evening.

8 pm

Over the summer, the pages of the press seem to have been filled with stories of young entrepreneurs developing thriving and often profitable businesses. They include Fraser Doherty, who makes jam using his grandma's recipe, and who attacked the Government's attitude to young entrepreneurs, saying that the enterprise culture should start not in the boardroom, but in the classroom. On 7 October, the Financial Times reported on a 15-year-old boy who founded a cosmetics company. I have heard of other successes, not least the teenager in my constituency who started up an online company selling shoes to people with big feet. He is doing very well, thank you very much.

In Committee, we supported the proposition that under-16s who are currently directors should be able to remain directors after the implementation of the clause, but the Government rejected that. We have proposed it again in amendment No. 388. However, we have thought further about the clause over the summer, and we now want to make a stand in support of the innovating youth of our country by tabling amendment No. 385. This is what the modern Conservative party stands for: youth, innovation and entrepreneurial spirit. What sort of example does the fuddy-duddy Labour Government set by attacking innovative youngsters?

That said, if the clause remains, my reading of subsection (5) suggests that a child who owned all the shares in a company-for example, a 14-year-old who had a bright idea and incorporated-and who appointed his parents as directors and told them what to do could, presumably, be treated as a shadow director. However, I am not sure that that follows logically. If the child is considered to be not old enough to take decisions as a director before he or she is 16, how can we say that the same child has the nous to act as a shadow director? Amendment No. 386 is designed to elicit clarification on that point. In Committee, the Minister responded to our argument by saying that really talented young entrepreneurs who direct businesses should be subject to criminal sanctions. We believe that we should support our youth and that there is merit in our amendment.

I am not sure why the words,

"The regulations may make different provision for different parts of the United Kingdom."

remain in the Bill. Amendment No. 387 would delete them. We are considering UK corporate law, and the words seem inconsistent and illogical. The Minister's response in Committee was that the provision was there "in case", but I am still in the dark as to the Government's reasons. Perhaps the Minister will now enlighten me.

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