Conclusions and recommendations
CHIPS
1. We
are concerned that there were initial teething problems with Companies
House Information Processing System (CHIPS) which resulted in
a deterioration of some services to dissemination agents. We trust
that all services are now of a similar or higher standard to that
offered before the rollout. IT systems should result in an improvement
of service to all customers: we would be concerned if that were
not the case. (Paragraph 19)
Companies Act 2006
2. The
delay to the Companies House Information Processing System (CHIPS)
has resulted in delays in bringing parts of the Companies Act
2006 into force. This is disappointing and the large amount of
public money wasted on the original contract is deplorable. Nonetheless
we believe Companies House and BERR were right to postpone commencement
of these sections of the Act, rather than to press ahead and risk
disrupting thousands of businesses if implementation proved impossible.
(Paragraph 22)
Status of Information filed at Companies House
3. We
believe that the Companies Act 2006 could have given greater rectification
powers to the Registrar of Companies to remove incorrect information
from the register without having to resort to the courts. (Paragraph
24)
4. We recommend that
Companies House takes every opportunity to make clear that its
primary function is to publish the information it receives, and
that it cannot guarantee the accuracy of the information. It needs
to amends its website and other published material to reflect
this reality as a matter of urgency. (Paragraph 26)
Disqualified directors
5. The
number of companies Companies House incorporates, 120 every working
hour, may mean that it cannot thoroughly scrutinise every name
that appears on the register. Where it appears that a mistake
has been made, the onus must be on concerned individuals and organisations
to report disqualified directors to Companies House for further
investigation by the Insolvency Service; the Insolvency Service
needs the resources to do its part. Any information available
to the relevant authorities relating to disqualified directors
that is not acted upon in a timely fashion will bring the whole
register into disrepute, especially if the information concerns
serious offences or malpractice. (Paragraph 32)
More stringent checks on directors?
6. We
understand why it would be desirable to have more thorough vetting
of directors and we note the British Bankers' Association's suggestion
that directors' details should be checked by Companies House against
other government held data. However, the principles of data protection
need to be abided by and the practicalities of such scrutiny considered.
Moreover, we recognise that Companies House's primary function
is to maintain its register and make it available to the public
and this would be a move away from its statutory role. Given the
volume of information handled, such vetting could have considerable
costs. There is also a danger if only partial checks were made,
users of the data could be given false confidence in its reliability,
rather than knowing, as now, that Companies House simply acted
as publisher. Nonetheless, we recommend that a cost-benefit analysis
is conducted of available ways to increase the level of checks
on directors and, in particular, to make it harder for disqualified
directors to evade detection by small changes in their details.
(Paragraph 33)
Company accounts
7. We
understand why Companies House did not include information on
the preparation of accounts when it first arranged to publish
them online. However there would be real benefits in giving this
information in the future. We cannot believe that there is any
significant technical barrier or extra costs to indicating the
involvement of a professional accountant on electronically filed
accounts. We also support the Professional Oversight Board's suggestion
that accountants should be notified of the filings, in which they
are named, to prevent them being falsely associated. We urge Companies
House and the Professional Oversight Body to resolve these issues
as soon as possible. The accountant identified as responsible
for filing the accounts should then take full responsibility for
the accuracy of the information contained in them. Notwithstanding
our recommendation in paragraph 26, this would enable users of
Companies House data to have much greater confidence in its reliability
without placing any additional burden on the companies whose information
is recorded there, or on Companies House itself. (Paragraph 37)
Identity fraud and 'company hijack'
8. We
understand the rationale for the withdrawal of the permanent police
presence at Companies House, but are nervous about this apparent
reduction in the overall anti-fraud effort. We recommend that
Companies House and both the Metropolitan and City of London Police
forces conduct regular assessments of the skills and knowledge
of the staff at Companies House in relation to the opportunities
for fraud. We also expect the possibility of reinstating the permanent
police presence to be kept under continuous review. (Paragraph
39)
9. We are pleased that Companies House is
continuing to work with the police in developing its intelligence
role and is contributing to data sharing among the UK's law enforcement
agencies. The effectiveness of these working arrangements must
be reviewed regularly. (Paragraph 40)
10. There is clearly
a balance to be struck between making the register useful to those
who are attempting to prevent crimes such as money laundering,
while preventing it being useful to those attempting to commit
other crimes such as fraud. This balance should be frequently
reviewed and legislation amended as necessary. (Paragraph 43)
11. We would have liked to have seen more
urgency in increasing take-up of electronic filing considering
the targets have never been met. We are disappointed that there
is no new campaign to encourage electronic filing until June 2009.
(Paragraph 47)
12. There are difficulties in balancing the
need to provide an accessible, efficient, open register of companies
details at a reasonable cost and the need to have systems to reduce
the opportunities for crime. The evidence presented suggests that
there could be merit in a review to assess whether Companies House
could do more to prevent crime without compromising its core functions.
Such a review could include a risk assessment to identify whether
particular types or sizes of companies are more vulnerable to
fraud, or more commonly used as vehicles for fraud than others
and if so whether there are cost effective targeted interventions
which could reduce the risks such as by asking for annual verification
of information submitted. (Paragraph
48)
Companies House and the market
13. We
understand that the border between providing core services to
the public and unfairly competing with the private sector is not
crystal clear. However, we do not believe this means a public
organisation should never seek to improve its services or that
it should be deterred from introducing facilities to reduce fraud.
We believe that Companies House has currently got the balance
broadly right, but it must be exceptionally careful, as it strives
to make its payments to the Treasury, that it does not abuse its
position. The Treasury, it follows, must not make unreasonable
financial demands of Companies House. (Paragraph 53)
14. Companies House
facilitates "do-it-yourself" incorporation if paper
is used: it is logical for it to offer this service electronically
as well. Here, again, the issue is transparency for those who
use the services of Companies House. The advantages and disadvantage
of using the service offered by Companies House should be made
clear. (Paragraph 56)
15. The Committee understands the frustrations
for incorporation agents of having to carry out "due diligence"
when incorporating when Companies House does not. Nonetheless
we do not believe that Companies House's role should be extended
to scrutinise the businesses they are incorporating. However the
register should show where an incorporation agent had been used
as opposed to an "off-the-shelf" incorporation and also
indicate the different levels of assurance that this provides.
(Paragraph 58)
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