House of Commons
|Session 2008 - 09|
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Public Bill Committee Debates
The Committee consisted of the following Members:
Gosia McBride, Committee Clerk
attended the Committee
Tenth Delegated Legislation Committee
Wednesday 21 January 2009
[John Cummings in the Chair]Draft Companies (Trading Disclosures) (Amendment) Regulations 2008
That the Committee has considered the draft Companies (Trading Disclosures) (Amendment) Regulations 2008.
The Chairman: With this it will be convenient to consider the draft Companies (Disclosure of Address) Regulations 2008.
The draft Companies (Disclosure of Address) Regulations 2008 are an essential element of the protection provided by the Companies Act 2006 to directors home addresses. The Act requires companies to provide both a service address and the usual residential address for each director. The service address will be put on the public record.
Addresses already on the public record will continue to be available from Companies House. The Act provides for applications for those addresses to be made unavailable for public inspection. Clearly, it is not possible to retract information already in the public domain, or indeed, available from secondary sources. The draft regulations provide procedures for an address to be made unavailable for future public inspection where there is a serious risk of violence or intimidation to the person to whom the address relates.
Company directors and secretaries, both past and present, will be able to make applications regarding the protection of their home addresses as they appear on the public record. Companies will also be able to make applications covering the addresses of all their members, and those such as creditors, who have registered a charge against a company will also be able to apply.
Addresses that have been made unavailable for public inspection will still be held by the registrar of companies but will be disclosed only under a court order. For reasons relating to the technology used by the registrar, only addresses filed since January 2003 will be able to be made unavailable for public inspection. Removing older addresses is not possible without endangering the integrity of the public record.
From 1 October 2009, any address filed as being a directors usual residential address will not be placed on the public record. Instead, the addresses will be protected information, which means they will be disclosed by the registrar only to credit reference agencies and those public authorities specified in the regulations. The Act also provides for some directors home addresses not to be made available to credit reference agencies.
The draft regulations specify the public authorities to whom the registrar may disclose protected information, and set the conditions for disclosure to both the specified public authorities and credit reference agencies. In addition, they provide the procedures for applications for home addresses not to be provided to credit reference agencies. The specified public authorities are the regulatory and enforcement bodies to whom the home addresses of directors with confidentiality orders may be disclosed under the Companies Act 1985, in addition to those other public authorities that currently rely on home addresses being made publicly available by Companies House for carrying out their public duties.
The draft regulations also provide the conditions for disclosure of home addresses by the registrar. The principal condition for disclosure to a specified public body is that it intends to use the information only for carrying out its public functions. Both the specified public authorities and credit reference agencies must undertake to ensure that the information is not transmitted outside the European economic area, although that restriction will not apply to the security services. The conditions for disclosure to credit reference agencies also include that they must intend to use the information for: assessing financial status; conducting checks for conflict of interest; preventing and detecting crime and fraud and; meeting obligations under the money laundering regulations.
Where a credit reference agency or a specified public body acts in breach of the conditions, the registrar has the power to discontinue disclosure of protected information to it. A credit reference agencys activities in protecting and detecting crime and fraud and in meeting obligations under the money laundering regulations include answering queries about directors from clients such as banks. Using protected information to confirm an address supplied by a director or a company on their behalf would be an acceptable use by a credit reference agency, but passing information to any person not entitled to get it direct from the registrar would be considered by the registrar to be a breach of the conditions.
Mr. Nigel Evans (Ribble Valley) (Con): If a company was conducting its own internal fraud investigations and wished to know the address of one of these directors, would that be allowed under the Act? If in-house fraud investigators were investigating somebody whose information would normally be registered, but which will now be protected, and the investigators passed that information on to the police, would only the police be able to investigate that fraud?
Ian Pearson: It is highly likely that in-house investigators know the residential address of the director anyway, so I am not sure that the situation would arise. If I receive better information on that, I will cover it in more detail in my closing remarks.
The draft regulations also provide for the procedure and conditions for a director to apply for his home address not to be disclosed to credit reference agencies. The main grounds for that higher protection is
that there is a serious risk that he, or a person who lives with him, will be subjected to violence or intimidation as a result of the activities of at least one of...the companies of which he is, or proposes to become, a director;
That higher protection will replace the confidentiality order regime under the 1985 Act. Any director who has a valid confidentiality order on 30 September 2009 will be covered by the higher protection. I take this opportunity
The draft trading disclosures regulations make two amendments to the Companies (Trading Disclosures) Regulations 2008. Both amendments provide an exemption from the requirement to display a sign with the companys registered name at all its premises. The purpose of that requirement is to ensure that the general public know the legal identity of a company operating from any premises. Other provisions ensure that that information is all that anyone needs to find out from Companies House all the information that the company is required to file for the public record, including the address at which service of documents on the company will be effective.
The need for the requirement is as great as when it was introduced in 1856, which is why it is retained by the 2008 regulations. However, following consultation, we have decided that there are certain circumstances in which the requirement should not apply. The 2008 regulations provide exemptions for domestic premises and for companies that have never traded. The draft regulations before us today provide two further exemptions.
The first exemption applies when, following the appointment of a liquidator, administrator or administrative receiver, the companys registered office has been moved to their offices. That is a temporary state of affairs and the sign would serve little purpose. The second exemption is from the requirement to display a sign at any of the companys premises except for its registered office and, if it has chosen to have such a place, the location for inspecting its statutory records. The exemption is for companies whose activities are likely to attract violent objections. All those who work at such sensitive companies are sometimes threatened. The question is how to identify those companies.
As I have explained, under the draft disclosure of address regulations, the directors of such companies will be able to apply for special protection for their home addresses. The draft trading disclosures regulations provide that, if a companys directors have all successfully applied for that special protection, the company will qualify for the exemption. However, the sign with the companys name will still be required at the premises where the public have a right to inspect certain records of the company, or where service of documents on the company is effective.
Both sets of draft regulations provide for special treatment. They meet the concerns raised during consideration of earlier regulations and expressed by many hon. Members during the passage of the Companies Act 2006, with which many hon. Members will be familiar.
Mr. Djanogly: That is a good start to the new yearthe first statutory instrument of the new year that I have debated.
The sections of the Companies Act 2006 that govern this matter are, as the Minister explained, designed to protect directors and companies from illegitimate intrusion,
The draft Companies (Trading Disclosures) (Amendment) Regulations 2008 relate to trading disclosures and add two further exemptions to a companys obligation to display its registered name at business premises; as such, it seems fairly uncontroversial. Given the dire economic climate, the first exemption is appropriate. If the company has had a liquidator, administrator or administrative receiver appointed and the companys place of business has therefore become the place of business of the liquidator, there is no longer a requirement to display the companys registered name at that place of business. A significant number of businesses now face the reality of liquidation and administration. I assume that the provision will ensure that the offices of corporate rescue professionals are not covered with the names of their struggling clients.
The second exemption protects sensitive locations. If every director of a company is a relevant director, the company does not have to display its registered name at any place of business other than the companys registered office or place designated for inspection of the companys records. A relevant director is one who has made a successful application under section 243(4) of the Companies Act 2006 and whose residential address consequently cannot be disclosed by the registrar. In short, the provision ensures the anonymity of the satellite offices of vulnerable businesses. That seems sensible, but as the importance of protecting sensitive locations is agreed, why does every director need to be a section 243 beneficiary? Why is the presence of a sole vulnerable director, or perhaps a majority, not enough? I shall be interested to hear the Ministers views.
Part 2 of the draft Companies (Disclosure of Address) Regulations 2008 relates to the disclosure of protected information as defined in section 240 of the Companies Act 2006. Protected information includes the directors usual residential address and any statement that his service address is his usual residential address. From 1 October this year, the registrar of companies is under a duty, according to section 242, to omit that information from the public record. There are exceptions to that general restriction, however, and section 243(3) provides that regulations may be made to specify the conditions under which protected information can be disclosed. The draft regulations before us are the regulations to which section 243(3) refers.
Part 2 of the regulations describes the circumstances in which the registrar is permitted to disclose protected information. Specifically, credit reference agencies and certain public authorities can, as the Minister explained, obtain protected information on satisfying certain conditions. The criteria generally appear to be fairly straightforward and reasonable. Regulations 4 and 5, however, raise a number of questions. Although in normal circumstances credit reference agencies can obtain protected information on satisfying the criteria in schedule 2 of the regulations, regulation 4 states:
The registrar shall refrain from disclosing protected information to a credit reference agency if such information relates to a section 243 beneficiary or a section 243 applicant.
That refers to section 243(4) of the Companies Act 2006, which allows a director to apply to the registrar to refrain from disclosing protected information to a credit reference agency. Regulation 5 regulates the application process, containing the grounds for such an application. The grounds alone appear uncontroversial, relating to the risk a director faces of being subjected to violence or intimidation. None the less, we think two points deserve attention.
First, certain organisations argue in favour of allowing CRAs and others, such as banks, to cross-reference the details with which directors provide them with the details on record at Companies House. However, as it stands, under the statutory instrument, in the circumstances of a successful section 243 application, CRAs will be prevented from any such cross-referencing, while banks and other entities not listed in schedule 1 are prevented outright from accessing details.
The CRAs wish to allow Companies House, in defined circumstances, to confirm that the details a director has provided to a CRA or other respectable entity are correct. Such an exception would facilitate important due diligence and anti-money laundering checks. Schedule 2 proposes that meeting the obligations of the Money Laundering Regulations 2007 be grounds to justify disclosure of protected information. It therefore seems logical that that should apply for cross-referencing purposes, as long as consent is obtained from the director in question. Will the Minister confirm whether that is the case?
Secondly, on a similar note, can Companies House, CRAs and others disclose protected information generally, provided that consent is obtained? That would allow a director to enjoy privacy with the flexibility of selective disclosure. As it stands, the CRAs maintain that the statutory instrument lacks that flexibility and could serve to hinder the dealings of company directors and their companies. Indeed, the lack of flexibility might act as a disincentive for vulnerable directors to apply under section 243.
Another question is what the CRAs can do with information they receive from the registrar. I appreciate that that point was raised in the other place. The Department for Business, Enterprise and Regulatory Reform was kind enough to send me a letter from Lord Brett to Lord De Mauley on the issue. In the debate on the statutory instrument in the other place, Lord Brett said:
Passing protected information to anyone not entitled to get it directly from the registrar would be considered by the registrar to be a breach of the conditions. It would, however, be acceptable for a credit reference agency to use protected information to confirm an address supplied to its client by a director or by a company on a directors behalf.[Official Report, House of Lords, 15 January 2009; Vol. 706, c. 1427.]
Will the Minister explain the reasoning behind that and confirm which section of the statutory instrument provides for it? Does the definition of protected information extend to a directors residential address that is filed before section 240 comes into force on 1 October 2009? If not, will a section 1088 application have to be made?
I have received representations from two CRAs, Experian and Equifax, raising concerns that their obligation to use protected information only for the purposes specified
Part 3 provides for general applications for addresses to be removed from the public record maintained by the registrar, pursuant to section 1088 of the Companies Act 2006. It is analogous to the section 243 provisions under part 2, but is relevant to any address that is available for public inspection at Companies House lodged on or after 1 January 2003. As such, it applies to a wider range of individuals and companies than the part 2 provisions. It could include the details of shareholders, former directors or company secretaries. Such persons or companies are, in certain circumstances, in similar need of protection.
The difference from the directors protection regime is that from 1 October 2009, current directors will enjoy automatic protection, because their address details fall under the definition of protected information in the 2006 Act. Section 243 applications are different, because they simply bolster a pre-existing protection by blocking CRA access to address details. The same grounds for application apply under section 1088, as provided in the statutory instrumentnamely, there is a serious risk of violence or intimidation. As with the protected information and section 243 regulations under part 2, it seems sensible to allow disclosure or cross-referencing when consent is obtained. The revocation provision under regulation 16 of part 4 of the SI is possibly again not flexible enough. To that extent, does the Minister believe that the revocation provision needs to be reviewed?
I thank the hon. Member for Huntingdon, who has just asked a series of questions, every one of which I was about to ask, so I shall merely add a few observations. Strategically, it is obvious that the two orders have been prompted by the idiotic actions of a few protesters who operate in an utterly counter-productive way to their own interests and thus spoil the more sensible campaigning opportunities for the larger number. I understand and empathise with the case for the first set of regulations.
As the Minister said, the second set of regulations clarifies an evident oddity in the provisions. If a company has ceased to trade and has been liquidated, it seems pointless for the premises of the liquidator to be technically labelled with a sign as the trading headquarters. I am pretty certain that that has not been happening anyway, so it is simply bringing the law into line with common sense. The second part of the regulations in respect of violent objectors refers to the point that I have just made. I have two questions: first, how likely is it to work? Is it really the case that the sanctions on disclosing the information are sufficiently robust to dissuade the holders of the information from sharing it in a careless fashion? What is the Ministers view? If it turns out that
My second question is more of a wistful observation. Frustration might be felt by financial institutions regarding access to the information but, given that the Prime Minister has just had to bail them out for £48 billion, it seems that the greatest beneficiaries of having their addresses retained in privacy are probably the leaders of our banking system.
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