House of Commons
|Session 2008 - 09|
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Public Bill Committee Debates
The Committee consisted of the following Members:
Mark Oxborough, Committee Clerk
attended the Committee
Ninth Delegated Legislation Committee
Wednesday 1 July 2009
[Joan Walley in the Chair]Draft Overseas Companies Regulations 2009
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Ian Lucas): I beg to move,
That the Committee has considered the draft Overseas Companies Regulations 2009.
Thank you, Mrs. Walley. It is a pleasure to appear before you today.
The draft regulations set out a simplified regime for registration of information at Companies House of companies incorporated overseas that operate their business in the United Kingdom through an establishment. The regulations are not about UK incorporated subsidiaries of overseas companies, but centre on overseas companies that conduct their business through a local representative or that have a small, permanently active base in the UK. That base could be, for example, a representative office, a warehouse or a shop.
The regime concerns only UK filing obligations for overseas companies to file specified information at Companies House. The internal governance of companies incorporated outside the UK is for the law of the country of their incorporation. In order best to protect UK creditors and the needs of law enforcement agencies, a regime has been prepared that continues to meet the European Union requirements of the 11th directive for branches of overseas companies, and that also includes companies operating a place of business in the UK.
The draft regulations include a revised accounting regime for overseas companies that is straightforward and up to date. The regime requires transparent reporting to make it easier for UK creditors to evaluate the information provided. Overseas companies will primarily file accounts as prepared under the parent law of the country in which the company is incorporated, but where there is no parent law or where that law is not comparable with EU directives and UK law, accounts are to be prepared and disclosed in a manner that is comparable. The provisions are based on those for UK companies as set out in the Companies Act 2006.
The regulations do not cover the law on the execution of contracts or the requirements to register the use of their assets in the UK to secure loans. Those will be covered by a separate statutory instrument, which will be made under the negative resolution procedure after the regulations have been made.
In line with the approach in the 2006 Act, the draft regulations apply to the United Kingdom rather than, as at present, only Great Britain, which will considerably simplify the position for overseas companies that conduct their business in both Northern Ireland and the rest of
The draft regulations meet the concerns raised during consideration of earlier drafts, and provide a single regulatory regime for the filing obligations of overseas companies operating in the UK.
Jeremy Wright (Rugby and Kenilworth) (Con): Thank you, Mrs. Walley. It is a great pleasure to serve under your chairmanship. May I thank the Minister for his exposition of the order? I am glad that he and I are of the same mind; while the order is very long, our remarks need not be.
Better regulation is usually simpler regulation, and in that spirit I entirely welcome the Ministers explanation of what the order aims to achieve. As he has said, it brings the requirements for registration for overseas companies under one regime, as opposed to two, which is welcome, particularly as it will make life easier for UK investors and creditors.
May I ask him for reassurance on two specific points? First, on the accounting regime, which is explained in paragraph 7.6 of the explanatory memorandum, there is a difference between European economic area countries and non-EEA countries in terms of what is required of companies when filing accounts. All companies in EEA countries are expected to comply with certain accounting standards, which is perfectly proper. Home state requirements will therefore be adequate, but that will not necessarily be the case in relation to non-EEA countries. The Minister has said that there will be provision for some basic requirements, which, as I understand it, will involve filling in a form for the registrar that indicates some basic accounting rules and procedures comparable to general accounting standards. I am interested to know whether the Minister anticipates any difficulties, particularly in relation to EEA countries that have different accounting standards in their home states that do not meet the basic requirements. Given the number of accountants who have been involved in the consultation process, will the Minster tell us whether any of them have raised concerns about that aspect of the order?
My second area of concern is the fact that the regulations will be subject to internal review within five years. Although I welcome that decision, I should like the Minister to tell us whether the review will involve a comparison with the anticipated benefits set out in the explanatory memorandum and the impact assessment, to determine whether those anticipated benefits have come to pass, and whether that information will be published as part of the review and placed in the Library of the House. As I said at the beginning, we support the orders and their objectives, and we wish them luck.
Lorely Burt (Solihull) (LD): We also welcome the new regulations. They will make it much more straightforward to register in the United Kingdom, which has to be better for business as a whole. The regime choice burden has been ended. Whether a company is categorised as a branch or a place of business does
My only question is about which companies are required to register. If a company is not registered but is, none the less, regularly trading in the United Kingdom, will that leave an opportunity for exploitation of either UK companies or UK consumers? Will the Minister tell me what rules are in place in relation to companies that trade regularly in the UK but do not have a physical presence here?
Ian Lucas: I thank hon. Members for their observations and comments, and I am grateful to them for their support of the regulations. The general purpose of the regulations is to protect consumers, individuals and businesses in the UK when they deal with companies that are not registered in the UK. We are seeking to put in place a regime that provides for the specific regulations relating to European economic area countries being available within the UK so that information on those companies is available. In the case of non-EEA countries, we want to ensure that as much information as possible about those particular companies is given to individuals, consumers and companies in the UK. The ideal scenario is to have a level playing field, but because of the different legal systems and systems of corporate law in other parts of the world, it will never be possible to achieve that.
We have received broad support for the proposals. The consultation has been wide, and we do not anticipate any difficulties. Turning to the point made by the hon. Member for Rugby and Kenilworth, none of the consultees anticipated difficulties in relation to non-EEA countries. I hope that that anticipation will be fulfilled in due course. It is extremely important that we carry out the type of review to which the hon. Gentleman referred. I am a great believer in the need for the House to consider the impact of our regulations and legislation to see
The regulations make a number of provisions relating to criminal offences, under which the company and officers concerned will be liable to penalties comparable to those set out for UK companies elsewhere in the Companies Act 2006. We take seriously the need to ensure that consumers, individuals and companies in the UK are protected from possible abuse of the companies process by companies that are based abroad. We have tried to place regimes in the regulations to protect consumers as far as we possibly can.
Lorely Burt: I am seeking assurance on the measures to ensure that companies that are effectively trading in the UK take the necessary steps to register. Are any measures in place to ensure that that happens and that the protection for consumers and companies will be put in place by virtue of the registration?
Ian Lucas: My anticipation is that there will be obligations on the branches operating in the UK to comply with the regulations. If those obligations are not fulfilled, action will be taken and sanctions applied. Although those companies do not have the same obligations as companies based in the UK, they still have obligations. If those obligations are not respected and fulfilled, action will be taken. Again, we will review that as the regulations take effect.
Question put and agreed to.
That the Committee has considered the draft Overseas Companies Regulations 2009.
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