The
Committee consisted of the following
Members:
Chairman:
Mr.
Mike Hancock
Atkins,
Charlotte
(Staffordshire, Moorlands)
(Lab)
Bone,
Mr. Peter
(Wellingborough)
(Con)
Burt,
Lorely
(Solihull)
(LD)
Clelland,
Mr. David
(Tyne Bridge)
(Lab)
Cohen,
Harry
(Leyton and Wanstead)
(Lab)
Farrelly,
Paul
(Newcastle-under-Lyme)
(Lab)
Heppell,
Mr. John
(Nottingham, East)
(Lab)
Hutton,
Mr. John
(Barrow and Furness)
(Lab)
Kawczynski,
Daniel
(Shrewsbury and Atcham)
(Con)
Lucas,
Ian
(Parliamentary Under-Secretary of State for Business, Innovation
and
Skills)Meale,
Mr. Alan
(Mansfield)
(Lab)
Penrose,
John
(Weston-super-Mare)
(Con)
Syms,
Mr. Robert
(Poole)
(Con)
Thurso,
John
(Caithness, Sutherland and Easter Ross)
(LD)
Wright,
Mr. Anthony
(Great Yarmouth)
(Lab)
Wright,
Jeremy
(Rugby and Kenilworth)
(Con)
Sarah Hartwell-Naguib,
Committee Clerk
attended
the Committee
First
Delegated Legislation
Committee
Monday 29
June
2009
[Mr.
Mike Hancock in the
Chair]
Draft
Registrar of Companies and Applications for Striking Off
Regulations
2009
4.30
pm
The
Chairman: As it is very hot in here, it is permissible for
anyone who wants to remove their jacket to do so, including the
Doorkeeper.
The
Parliamentary Under-Secretary of State for Business, Innovation and
Skills (Ian Lucas): I beg to
move,
That
the Committee has considered the draft Registrar of Companies and
Applications for Striking Off Regulations
2009.
The
Chairman: With this it will be convenient to
consider the draft Companies Act 2006 (Part 35) (Consequential
Amendments, Transitional Provisions and Savings) Order
2009.
Ian
Lucas: It is a pleasure to appear before you for the first
time, Mr. Hancock. I have already experienced your courtesy
with the decision on our
jackets.
The
draft regulations and the draft order, with their snappy titles, cover
the functions of the registrar of companies. The basic functions are
set out in part 35 of the Companies Act 2006, which largely replaces
the relevant provisions of the Companies Act 1985, but it provides new
powers and duties for the registrar which will help Companies House to
maintain the register as a useful and accurate source of information
for users.
The draft
Registrar of Companies and Applications for Striking Off Regulations
2009 supplement parts 31 and 35 of the 2006 Act by making more detailed
provision in four areas: rectification of the register, annotation of
the register, language requirements, and an application by a company to
have its name struck off the register. The registrar does not currently
have any statutory powers to remove information from the register,
although the registrar will remove material if a court order authorises
it.
The 2006 Act
introduces two new statutory procedures requiring the registrar to
rectify the registerthat is, to remove material from the
registerunder a court order or under a new administrative
procedure on application to the registrar. The new administrative
procedure has been introduced to permit certain information to be
removed from the register without a court order. That will help to
address issues relating to the filing of inaccurate, forged or
fraudulent information on the register, although we believe that
matters requiring adjudication of competing claims should be left to
the
courts.
Under
the draft regulations, it will be possible for an applicant to seek
removal of company officers details from the register.
Companies House will follow the procedure set out in the regulations
and, if no objection is received, the material will be removed. It will
also be
possible for companies to seek removal of material relating to changes
to a companys registered office address. The way in which the
provisions of the 2006 Act are framed in relation to a companys
registered office and the grounds for rectification effectively
precludes the possibility of an applicant other than a company making
an application in respect of a registered office address, and prevents
the administrative procedure from being used at all in respect of a
registered office address provided on incorporation of the
company.
An
earlier draft of the regulations was withdrawn in the light of fresh
evidence that some companies were purportedly appointing directors
without the consent or knowledge of the persons concerned. The earlier
draft addressed that issue when there is a change of directors in an
established company, but the revisited regulations also address the
issue when directors are purportedly appointed when the company is
first set up. We are aware that the provisions of the Act and these
draft regulations do not provide a full answer to issues relating to
the accuracy of the register, particularly when the company has
provided fraudulent information about its registered office address. We
will consider the matters further, and we intend to consult in due
course on possible changes to the law in that area, which might include
changes to the 2006
Act.
The
second area in which the draft regulations make more detailed provision
is annotation of the register. The draft regulations authorise the
registrar to annotate the register when he believes that any material
on it is misleading or confusing.
The 2006 Act
contains rules about the language in which documents can be drawn up
and delivered to the registrar under company and insolvency
legislation. The basic rule is that they must be drawn up and delivered
in English. The draft regulations add further documents to the list in
the 2006 Act that can be delivered to the registrar under companies
legislation in a language other than English provided that they are
accompanied by a certified translation into English. That does not
apply to Welsh companies, which can deliver any document to the
registrar in Welsh so long as it is accompanied by an English
translation. The draft regulations relax that exception for Welsh
companies further, prescribing documents relating to certain Welsh
companies that can be delivered to the registrar in Welsh without a
certified translation into
English.
The
regulations also provide the characters and symbols that are permitted,
to the exclusion of others, in names and addresses contained in
documents delivered to the registrar.
Finally, the
draft regulations require an application by a company to have its name
struck off the register to contain a declaration that there are no
circumstances as set out in sections 1004 and 1005 of the 2006 Act
which prevent the application from being
made.
It
is important to Companies House and very helpful to business to have a
coherent and consistent registration system for all types of business
that are required to send material to Companies House. It has always
been our intention to apply provisions of part 35 relating to the
registrar of companies to forms of business association other than
companies. Some provisions already apply generally to companies and
other bodies, but others, such as certain provisions relating to
electronic delivery, must be applied to other bodies to provide a
coherent
system. It would be possible to do that by making consequential
amendments to each individual area of law. We believe that the
legislation would be clearer and simpler if we amend part 35 itself to
achieve that. The draft Companies Act 2006 (Part 35) (Consequential
Amendments, Transitional Provisions and Savings) Order 2009 will give
effect to
that.
I
should make it clear that the amendments made by the draft order are
relatively modest in their impact, as they are concerned essentially
with procedural and administrative matters. The draft order does not
seek to extend all provisions of part 35, and does not seek, for
example, to extend the provisions about correcting or removing material
on the register.
The
instruments will make an important contribution to our efforts to make
the register a useful and accurate source of information for users. I
commend them to the
Committee.
4.37
pm
John
Penrose (Weston-super-Mare) (Con): It is a pleasure, Mr
Hancock, to have you in the Chair this afternoon. I thank the Minister
for a clear exposition of some pretty detailed and technical measures
that are embodied in both instruments. In general, the principles that
underline them, which are those of administrative simplicity and of
ensuring that accurate, clear and up-to-date information is available
about the companies that are operating in this country, clearly have
support on both sides of the House. Therefore, my party certainly has
no objection in principle to any of the measures. However, I have a
couple of technical questions for the Minister to ensure that we have
understood one or two of the implications of the things that he has
been discussing.
Paragraph 7
of the explanatory memorandum of the draft regulations says it will be
possible
to have certain
fraudulently filed material removed from the register without making an
application to the
court.
I
want to get a sense from the Minister of what quantification his
Department has done to assess the extent of the problem. How many
examples of fraudulent material are being filed every year? Is the
problem getting worse or better? What is the scale of the
problem?
That
moves us on to my second query. I want to get a sense from the Minister
of whether the measures are proportionate to the scale of the problem.
If it is a major problem and getting worse, large-scale measures will
be in order. If it is a relatively minor problem that the Government
are trying to nip in the bud, minor measures might be enough. We do not
want to
overreact.
The
Minister mentioned that the original draft regulations were laid and
then withdrawn, and he explained why. Paragraph 8.2 of the explanatory
memorandum states that the revised draft
regulations
were
placed on the BERR website for information on 2 May
2008.
Has
there been any positive or negative reaction to the revised draft
regulations? It is important to know that because paragraph 10.1 of the
explanatory memorandum
states:
The
instrument has a negligible impact on the costs of business, charities
or voluntary bodies. An Impact Assessment has therefore not been
produced.
If there has been little
reaction and the people who could be affected are entirely unworried,
that is ample evidence to suggest that the proportionality of the
Governments reaction to the perceived problems is about right.
It would help to know whether stakeholders have made any comments so
that there is external verification of the Governments
assertion that an impact assessment is not
necessary.
I
have a similar question about the snappily titled draft Companies Act
2006 (Part 35) (Consequential Amendment, Transitional Provisions and
Savings) Order 2009. The Government say that they have undertaken no
public consultation on the grounds that the measures are minor and
technical. Paragraph 8.1 of the explanatory memorandum states that the
Department
has
not carried out a public consultation on the draft Order because it
does not confer new obligations to deliver documents to the
registrar.
Paragraph
10.1 states that there is no need for an impact assessment. If there
has been no public consultation, how do the Government know that? What
evidence do they have to reassure me and others that the order is
purely technical, that the Government response is proportionate and
that we are not inadvertently imposing unexpected and unwanted costs on
business through the law of unintended
consequences?
Assuming
that the Minister provides cogent and straightforward answers, I do not
anticipate having any further objections or
concerns.
4.43
pm
John
Thurso (Caithness, Sutherland and Easter Ross) (LD): It is
a pleasure to appear under your chairmanship, Mr. Hancock. I
know that you have chaired many Committees, but this is the first time
that I have had this
pleasure.
I
thank the Minister for his comprehensive explanation of this detailed
and technical draft legislation. It is important that Companies House
is an accurate source of information. It is the first port of call for
many people when trying to discover the sort of company with which they
are
dealing.
Like
the hon. Member for Weston-super-Mare, I am interested to know what
will be the implication of not having a court order. I have personal
experience of the matter. Some years ago, a company had me listed as a
director three years after I had formally resigned. It was quite a job
of work to get myself off the register. I suspect that that
case would have been made easier if a court order had not been needed.
If that is the case, I welcome the measure. The Minister said that the
register is not wholly accurate and that there is more to do to make it
so. I am glad that he and his officials are working on
that.
I,
too, noted the consultation process. The Department listened to what
people said about the initial draft regulations and looked at them
again. I look forward to the Ministers answers to the questions
that have been asked on
that.
I
have just one small set of questions on the elements that deal with
translation. The instrument allows for documents to be lodged in a
language other than English provided that they are accompanied by a
certified translation. The first question is, in the event that legal
proceedings are necessary at any point, would the original
language or the certified translation hold sway in a British court of
law? There is a subtle difference in relation to that because, even if
they are certified, not all translations are necessarily an accurate
legal reflection of the document that they purport to
translate.
The
second thing is that although I welcome the exemption for the Welsh
language and the fact that a certified translation is not always
required, does that not make it slightly difficult for those of us who
are not fluent Welsh speakers? Should some provision be made, so that
we can at least have a sense of what has been included? The third
question, which follows on neatly from that, is that if the Welsh are
allowed to place their documents on record in Welsh, which is I think
is P Gaelic as opposed to Q Gaelic, or
it might be the other way around, why cannot Scotland, which recognises
the other form of GaelicScots Gaelicas a language in
Scotland not benefit from the same relaxation? I am sure that an answer
to that question would keep my nationalist friends
happy.
4.46
pm
Harry
Cohen (Leyton and Wanstead) (Lab): I want to ask the
Minister just one question about companies set up in the UK with the
main purpose of dealing with overseas companies. The draft order alters
the arrangements for overseas branches, although they do not have to be
called that. I am thinking of the case of Bernie Madoff, who had a
company in the UK that operated his affairs for him here. I also think
that moneyperhaps even for political purposeshas come
into companies operating in this country which was really meant for
overseas companies. If a company has a primary purpose of dealing with
an overseas company, is there not a case for saying that a registered
company should put that down as its main purpose in the register so
that people have some clarity in that regard? I know that the subject
is not covered by the instruments, but I put it to the Minister that it
perhaps should be considered and
added.
4.48
pm
Ian
Lucas: I thank hon. Members for their contributions to
improve the interests covered by debate. First, I shall deal with how
widespread the procedure is likely to be. I understand that
approximately 60 to 80 filings a month are alleged to be fraudulently
filed at Companies House. Such filings relate either to a change of
registered office address or to the appointment or removal of a
director or secretary. The numbers involved are not small, but they
certainly merit attention and, indeed,
action.
John
Penrose: Will the Minister give us an indication of what
proportion of the monthly total that is and whether the problem is
increasing, declining or holding relatively
steady?
Ian
Lucas: Before I respond to that question, I will clarify
the matter by saying that the rectification procedure would be used not
just for fraudulent cases, but for cases that involved simple factual
errors. That would enable Companies House to deal with matters much
more efficiently and swiftly than by applying to the court, which is
the necessary process currently.
On the
reaction to the proposals, the draft regulations were discussed in
detail with major stakeholders and published on the departmental
website. We have received full support for them, and there has been an
attempt to provide more accurate and reliable information on the
register. We also heard that stakeholders wished to look in more detail
at rectification. That is why we are consulting further and making
efforts to respond further to the points that have been raised through
the
process.
We
are keen to work with stakeholders to reach a satisfactory conclusion.
This is not the end of the story, but we will certainly do all that we
can to work with stakeholders to come to the end of the story as soon
as
possible.
John
Penrose: I want to ensure that I fully understand the
Ministers comment. I understand that the original draft
regulations, which were withdrawn, had a lot of support, although there
were some technical concerns that the Government say they have dealt
with in their revised draft regulations. However, have there been any
additional reactions to those revised drafts, as opposed to the
original set, and were those positive or
negative?
Ian
Lucas: I understand that the reaction to the revised
drafts led to the further discussions that now are taking place. That
is why our debate on these draft regulations is not the end of the
story. We need to return to the matter and deal with the queries that
are being raised
now.
Perhaps
it will assist the hon. Gentleman if I give an example of the type of
thing that has been raised. If details of a registered office were
given by a company without the consent of the person who lived at that
registered office, the representation by the business that presented
that registered office would be factually correct, but there would not
be an element of consent from the individual who lives there. That
example was raised in the consultation that is taking place and it has
not yet been resolved by the process that we have gone
through.
John
Penrose: The Ministers reply worries me. I thought
that the Government had consulted on the original regulations, seen
that there were problems, withdrawn them and replaced them with the
draft regulations that we are discussing, which would mean that the
newer draft regulations are acceptable. However, I think that he is
telling me that they are not acceptable, but none the less we are
debating them and the Government want to go ahead with them
now.
I
am concerned that we are being asked to approve something that the
Government think is flawed, because the Minister said that the
Government will come back and have another goanother bite of
the cherrylater on. If the draft regulations are currently
flawed, should not the Government withdraw them now and return with
revised ones later in the interests of getting it right, rather than go
through the process several times and come back again with more
amendments?
Ian
Lucas: The draft regulations are not flawed; they deal
correctly with matters that were raised in the previous consultation,
which is what they aim to do. Some things have not been resolved to
date, but the draft regulations do not seek to resolve those. We are
dealing with what was raised in response to the original consultation.
However, this is not the end of the story, because there is commitment
to come back to the Committee on some things, including the example
that I
mentioned.
On
the proportion of cases, more than 2 million companies and more than 8
million directors are on the register. While the figure for fraudulent
entries is not completely insignificant, it is still a small proportion
of the cases that have been presented.
The
Chairman: Order. If I may interrupt for the benefit of the
Committee, I think that the question was more about what proportion
that 80 was of the ones that were
registered.
John
Penrose: Thank you for your helpful comment,
Mr. Hancock, which is absolutely right. My question was
about the 60 or 70 that were fraudulent as a proportion of the flow
each month, rather than of the total stock of companies that are
registered, and about whether the percentage of that flow is growing or
declining.
Ian
Lucas: I cannot give a figure on the monthly transactions,
but I shall write to the hon. Gentleman on that matter and the
interesting figure of whether the number is increasing or
declining.
From
the comments of the hon. Member for Caithness, Sutherland and Easter
Ross about Gaelic, I sensed a local press release coming on, but
perhaps I am being desperately
unfair.
The
Chairman: If you can avoid it, do not
bite.
John
Thurso: Let me reassure the Minister that there is no way
that I would wish to issue a press release on that, as there is a
controversy in Caithness, which does not regard itself as speaking
Scots-Irish Gaelic, but if there is Gaelic, it prefers the old British,
which is the Welsh kind. I leave all of that to the Highland Council
and would not wish to intervene.
The
Chairman: I am glad, because that would take us far
outside the remit of this
legislation.
Ian
Lucas: Indeed, and I represent a constituency from Wales,
so I am well aware of the complications involved in that subject.
However, I am grateful to the hon. Gentleman for raising the issue of
translations, because it is important and the Government have a
statutory commitment to the Welsh language under the Welsh Language Act
1993. On translations more generally, if any litigation arises from the
content, Companies House will provide a translation of the content of
the documentation at Companies House. His point about which language is
the admissible language in court is important. I need to take advice on
it and will write to him.
I also
listened carefully to the question that my hon. Friend the Member for
Leyton and Wanstead asked. I am grateful to him for raising that point,
but, again, I need to check the position, so I shall write to
him about that.
I hope that I
have dealt with the issues that hon. Members have raised. The
instruments will make an important contribution to our efforts to make
the register a more useful and accurate source of information for
users, and I therefore commend them to the
Committee.
Question
put and agreed
to.
Draft
Companies Act 2006 (Part 35) (Consequential Amendments, Transitional
Provisions and Savings) Order
2009
Resolved,
That the
Committee has considered the draft Companies Act 2006 (Part 35)
(Consequential Amendments, Transitional Provisions and Savings) Order
2009.(Ian
Lucas.)
The
Chairman: I thank all hon. Members for their courtesy and
for being so
good-natured.
4.59
pm
Committee
rose.