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Public Bill Committee Debates

The Committee consisted of the following Members:

Chairman: Sir Nicholas Winterton
Austin, John (Erith and Thamesmead) (Lab)
Browne, Des (Kilmarnock and Loudoun) (Lab)
Burt, Lorely (Solihull) (LD)
Caborn, Mr. Richard (Sheffield, Central) (Lab)
Davies, Philip (Shipley) (Con)
Heppell, Mr. John (Nottingham, East) (Lab)
Hewitt, Ms Patricia (Leicester, West) (Lab)
Lucas, Ian (Parliamentary Under-Secretary of State for Business, Innovation and Skills)
Marsden, Mr. Gordon (Blackpool, South) (Lab)
Munn, Meg (Sheffield, Heeley) (Lab/Co-op)
Penrose, John (Weston-super-Mare) (Con)
Prentice, Mr. Gordon (Pendle) (Lab)
Soames, Mr. Nicholas (Mid-Sussex) (Con)
Thurso, John (Caithness, Sutherland and Easter Ross) (LD)
Tredinnick, David (Bosworth) (Con)
Wright, Jeremy (Rugby and Kenilworth) (Con)
Mark Oxborough, Committee Clerk
† attended the Committee

Fifth Delegated Legislation Committee

Wednesday 28 October 2009

[Sir Nicholas Winterton in the Chair]

Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2009

2.30 pm
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Ian Lucas): I beg to move,
That the Committee has considered the Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2009 (S.I. 2009, No. 2615).
The Chairman: With this it will be convenient to consider the draft Company, Limited Liability Partnership and Business Names (Public Authorities) Regulations 2009.
Ian Lucas: It is a pleasure to serve for the first time under your chairmanship this afternoon, Sir Nicholas, and to welcome such a distinguished array of talent to the Statutory Instrument Committee. I wish to explain that the registered name of a company or of a limited liability partnership is its name on the index of company and corporate names maintained by the registrar of companies. The registered name is usually the name taken on corporation, but it may have been changed subsequently. The primary purpose of the index of company and corporate names is to enable a member of the public to find information on the public record relating to a particular company or limited liability partnership. That is why the registered name must be disclosed in all business correspondence and documentation, whether or not the company or limited liability partnership trades under its registered name.
Business names, in contrast, are those under which anyone trades, whether the trader is an individual, a partnership, a company or a limited liability partnership. Businesses such as sole traders and partnerships are unincorporated bodies. They do not register with the registrar of companies and do not have a registered name. When the register of business names was abolished nearly 30 years ago, a requirement was introduced for the Secretary of State’s prior approval for certain names, but there was no requirement for prior approval for a business name that was simply the trader’s or partner’s surname, with or without forename and/or initials, or, if the trader was incorporated, their registered name.
Prior approval was required if a business name or a company’s registered name gave the impression of a connection with Her Majesty’s Government or with a local authority. That has since been extended to cover the Scottish Administration and the Welsh Assembly Government. Approval has been given only if a genuine connection exists and the Government body concerned supports the application. Prior approval was also required for names that included certain words and expressions that were specified in regulations.
Names can be persuasive. They might be chosen to trick the public. That is why the Companies Act 2006 retains the requirement for the Secretary of State’s prior approval for a business name or a company’s registered name that would be likely to give the impression of a connection to a part of the Government. The Act also extends those requirements to the business name of a person carrying on a business in the United Kingdom. The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 apply all the provisions relating to companies’ registered names to the registered names of limited liability partnerships.
The Companies Act 2006 also requires prior approval for business names and registered names that suggest a connection with a prescribed public authority, just as prior approval is required for names that suggest a link to Her Majesty’s Government, a devolved Administration or a local authority. The power to prescribe public authorities is new. The draft Company, Limited Liability Partnership and Business Names (Public Authorities) Regulations 2009, which we are considering today, use that power. I will deal with those regulations first.
There is scope for the unscrupulous to adopt names that suggest a connection to public bodies, to trick the public into revealing sensitive information. The draft regulations list only those 26 public authorities that might be expected to have the authority to ask members of the public for information about themselves or their finances. Twenty of the specified public authorities are legislatures, Government auditors and financial regulators. As for the other six specified public authorities, the relevant Departments have advised that there is a risk of harm to the public from persons purporting to be connected with them. Non-departmental bodies are not listed unless they have functions under the Crown.
The 26 listed public authorities are a tiny percentage of bodies with public functions. The list does not include bodies if there is no or minimal risk to the public from names that misleadingly suggest a link to them. For each of the prescribed public authorities, the regulations specify a body that an applicant must contact to ask that body whether it has any objection to the proposed name, and if so why. The applicant must enclose a copy of any response with the request for the Secretary of State’s approval for the name. That will ensure that the decision on whether to approve the name is well informed.
As I explained, prior approval is also required if a business name or registered name includes certain words or expressions. The Company, Limited Liability Partnerships and Business Names (Sensitive Words and Expressions) Regulations 2009 list 155 words and expressions for which prior approval is required. The regulations, which replaced the Company and Business Names Regulations 1981, were made on 25 September and came into force on 1 October. We are considering them today because they will fall unless approved by Parliament.
About half the sensitive words and expressions in the regulations were prescribed previously in the Company and Business Names Regulations 1981. The newly prescribed words and expressions are those that convey authority, status or pre-eminence. That is because names that include such words might be used to induce members of the public to pass on money or personal information. We also prescribe the Welsh and Scots Gaelic versions of words if they are considered to create a similar risk to the public as the word in English. The Northern Irish Executive have advised that there is not a similar risk from words in either Irish Gaelic or Ulster-Scots.
In the case of 78 of the 155 prescribed words, any person wishing to use such a word needs to have sought the view of a specified body about using that word before making the application to the Secretary of State. In the case of the 77 words for which no prior view needs to be sought, the Companies House website will give guidance on what factors the Secretary of State will take into account when deciding whether to grant approval.
“Cymru” and “Alba” were not previously prescribed. Those words are already in widespread use as company, limited liability partnership and business names, without any apparent harm to the public. Furthermore, it would be impractical to make it a criminal offence to adopt a business name that includes those words. Trading standards officers would need first to establish whether a business had started trading under that trading name before or after 1 October 2009, which could be difficult. “Cymru” and “Alba” are now prescribed so that prior approval is required for their inclusion in a registered name. That restriction also applies to specified grammatical variants of the words. Since 1 October 2009 the registrar of companies will only register the name of a company or LLP that includes one of the words if certain criteria are established. The first criteria is pre-eminence in the geographical area concerned. The second is that the registered office would have to be in Scotland or Wales. It would have to be specifically stated that the office was in Wales, as opposed to in England and Wales.
Since 1 October it has been an offence to carry on business under a name that gives so misleading an indication of the activities of the business as to be likely to cause harm to the public. The offence will apply whether or not the offensive name is a registered name and, indeed, whether or not the business has a registered name. We expect the offence to be a useful weapon against businesses that trick the public into believing that they carry on activities that, in reality, they do not.
Meg Munn (Sheffield, Heeley) (Lab/Co-op): I am interested in the issue that the Minister raises, and in two of the listed words in particular: “co-operative” and “Sheffield”. On “co-operative”, I am a Labour and Co-operative Member of Parliament, and the co-operative movement is clear that co-operatives must be properly co-operative to use that name, so I welcome that provision. The Minister talked about regional and location issues; can he confirm that the inclusion of “Sheffield” is designed to protect the “Made in Sheffield” mark that guarantees the quality of particular products produced in Sheffield?
The Chairman: A lengthy intervention, but a good one.
Ian Lucas: I can indeed confirm that the name “Sheffield” is protected—the Under-Secretary of State for Business, Innovation and Skills, my right hon. Friend the Member for East Ham (Mr. Timms), has given that undertaking—and that is to protect the well-established and accepted identification of Sheffield as a place that manufactures goods of quality, particularly in the iron and steel industry. I shall come back to the co-operative movement in a moment.
With the offence in place, it is not necessary to require prior approval for words and expressions that could cause harm to the public by misleading them as to the activities of a business. It has been suggested that the new offence is less effective than prescribing a word, because it applies only once there is business activity. In that respect, the new offence is exactly the same as the offence of carrying on a business under a name that requires prior approval under the regulations. The offence will be more effective than prescribing any particular word, as it addresses the harm to the public directly, thus making it less easy for the unscrupulous to devise a way around the control.
We believe that the new offence will be an effective weapon against those who use names to trick members of the public into believing that a particular business is carrying on an activity that, in fact, it is not. In particular, it will be useful against bogus colleges, including any that were already trading before 1 October 2009. Owing to the savings provision in section 1199 of the Companies Act 2006—a long Act indeed—simply prescribing the word “college” would not have affected any existing businesses. The new offence is better targeted and more immediate in its ability to attack abuses.
Mr. Gordon Prentice (Pendle) (Lab): Are there any controls on web addresses? If the whole purpose is to stop companies misleading consumers, there is a gaping loophole—a company could have a registered business address, but people might get to the company via a website that could be misleading.
Ian Lucas: The statutory instrument is not directed at web addresses as such, but any representation by any organisation on a web address would fall within the remit of the statutory instrument, as the organisation would be representing a particular site as a business address. That could therefore be the subject of complaint, either to the local trading standards officer or the registrar of companies.
Lorely Burt (Solihull) (LD): On the point about colleges, I am sure that the Minister will remember the question from my hon. Friend the Member for Colchester (Bob Russell) on the word “college”, and I think that hon. Members will have been lobbied on the issue. I am trying to understand what the problem is with adding “college” to the list. It includes “special school” and “university”, so is it not a contradiction in terms not to allow a word such as “college”? It has been proven that bogus companies have caused a lot of damage to the reputation of good colleges throughout the country.
Ian Lucas: The hon. Lady raises an important point. The matter was considered by the Home Affairs Committee and has caused concern. We have looked at it closely and have taken this course because, if we had simply prescribed “college”, any colleges established before 1 October this year could continue to trade and would not be subject to sanction. Our preferred approach is to rely on the new offence to which I referred. It will mean that any organisation representing itself as a college that is not a college could be subject to sanction, whether it started operating before or after 1 October 2009.
Lorely Burt: If that is so, and the law exists that allows us to prosecute and remove bogus colleges, I struggle with the logic of allowing future bogus colleges to set themselves up; we then have to catch them. Why not make sure that organisations that want to use the word “college” comply with the same legislation that applies to other words?
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