The
Committee consisted of the following
Members:
Barlow,
Ms Celia
(Hove)
(Lab)
Bone,
Mr. Peter
(Wellingborough)
(Con)
Burt,
Alistair
(North-East Bedfordshire)
(Con)
Dhanda,
Mr. Parmjit
(Gloucester)
(Lab)
Djanogly,
Mr. Jonathan
(Huntingdon)
(Con)
Evans,
Mr. Nigel
(Ribble Valley)
(Con)
Liddell-Grainger,
Mr. Ian
(Bridgwater)
(Con)
McCartney,
Mr. Ian
(Makerfield)
(Lab)
Meacher,
Mr. Michael
(Oldham, West and Royton)
(Lab)
Öpik,
Lembit
(Montgomeryshire)
(LD)
Pearson,
Ian
(Economic Secretary to the
Treasury)
Singh,
Mr. Marsha
(Bradford, West)
(Lab)
Thurso,
John
(Caithness, Sutherland and Easter Ross)
(LD)
Tipping,
Paddy
(Sherwood)
(Lab)
Ward,
Claire
(Vice-Chamberlain of Her Majesty's
Household)
Wood,
Mike
(Batley and Spen)
(Lab)
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
2.30
pm
The
Economic Secretary to the Treasury (Ian Pearson): I beg to
move,
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.
Ian
Pearson: It is a pleasure to serve under your
chairmanship, Mr. Cummings.
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
to thank the Association of British Pharmaceutical
Industries for providing the basis of the scheme for protecting
directors home addresses in the 2006
Act.
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.
2.39
pm
Mr.
Jonathan Djanogly (Huntingdon) (Con):
rose
Hon.
Members: Hear,
hear!
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,
intimidation and perhaps even violence. In broad terms, they have our
support as much now as when we originally promoted them during debate
on the Companies Bill. We generally support the SIs, which essentially
reinforce measures that protect sensitive information and
deal with some of the important practical issues surrounding
it.
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
in schedule 2 will conflict with their obligations under the Data
Protection Act 1998 to disclose information on the request of a
director. My reading is that that will not be the case, because
schedule 2, part 2 provides that the condition for the disclosure of
protected information is that the agency maintains appropriate
procedures to ensure compliance with its obligations under the Data
Protection Act. Will the Minister confirm that there is no conflict
between the statutory instrument and the Data Protection
Act?
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?
2.50
pm
Lembit
Öpik (Montgomeryshire) (LD): Welcome to the Chair,
Mr.
Cummings.
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
the law is being flouted subsequent to the passing
of the order, what reassurance can he give that we can revisit the
matter?
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.
2.52
pm