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Lord Sharman: In opposing that Clause 681 should stand part of the Bill, I seek to remove the power of the Secretary of State to make regulations requiring documents to be delivered to the registrar by electronic means.
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The clause gives power to the Secretary of State to make regulations, by the affirmative resolution procedure, requiring companies to deliver documents to the registrar by electronic means if the registrar has published rules setting out the detailed requirements for such delivery.
While we support the provision in Clause 682 for a voluntary procedure for electronic delivery of documents, we consider that it is disproportionate for companiesespecially small companiesto be required to make the investment in the technology required to prepare and file documents electronically, or to engage professionals to do so on their behalf. We see no benefit in this provision.
Lord Hodgson of Astley Abbotts: The noble Lord, Lord Sharman, has made a powerful case. As the noble Lord, Lord Sainsbury, keeps telling us that the Government wish to think "small first", this is an occasion on which they can do so by striking out this power of compulsion. The noble Lord, Lord Sharman, has made a powerful argument, particularly in regard to smaller companies.
Baroness Noakes: I also support the noble Lord, Lord Sharman. The registrar has already achieved incentives for electronic filingfor example, through the differential fee method. That seems to me to be perfectly adequate to achieve the registrar's undoubted desire to take costs out by making it more expensive for those who wish to file certain documents on a paper basis. It would be draconian to do any more than that.
Lord McKenzie of Luton: Other clauses in the Bill do much to make it easier for companies, if they wish, to submit information electronically to the registrar. Indeed, facilitating the use of such communications generally is one of the themes underlying many areas of the Bill, which has been very much welcomed by business and others.
I agree that there is a great difference between facilitating such communications and requiring them. That is why, whereas in many respects the Bill provides that the registrar will be able to make rules about the form and manner of documents which are sent to her, in this instance only the Secretary of State can do so. Any such regulations will be subject to the affirmative resolution, thus ensuring that Parliament has actively agreed to the change. Even so, I understand the concern at any prospect that a large number of companies which are not ready for, and do not want, electronic communication, may be forced into it.
I am happy to give assurances that this is not our intention. The Government have no plans to make use of this power in the short term. The power is there purely to provide flexibility for the longer term when, at some future date, it may have become so much the norm for companies to use electronic communications
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that there is effectively no real burden imposed by requiring them to use such forms of communication in some circumstances. That day has not yet arrived and, until it does, I do not see the power being used. But it is right that the Bill should include a mechanism to make provision as and when it does arrive.
Lord McKenzie of Luton: As I hoped I had explained, it is there because at some stage in the future it may be desirable to use it. But I stress there is no current intention to use it and the Government believe it would be wrong to do so in the short term.
The noble Lord said: The purpose of the amendment is to clarify the effect of delivery of a replacement document so far as concerns compliance with time limits and other requirements for proper delivery prescribed by the Companies Acts.
Clause 688 allows the registrar to require a company to replace a filed document which does not meet the statutory requirements in Clause 684(1) if it is not corrected under Clause 685 or replaced voluntarily under Clause 686. The clause does not specify how the filing of a replacement document is to be treated for the purposes of, for example, late filing penalties or, perhaps more importantly, for validity purposes.
An example of late filing would be the penalty for late filing of accounts. If the accounts originally filed were non-compliant and replacement compliant accounts were filed after the permitted date for filing accounts, would a penalty be incurred? An example of the validity issue would be the invalidity of a mortgage or charge requiring registration under Section 395 of the Companies Act 1985. If particulars of the charge and the instrument creating it are not delivered to the
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registrar within 21 days of the creation of the charge, it is invalidthat is, unless the court orders otherwiseagainst a liquidator or administrator and any creditor of the company concerned. If the particulars are duly delivered but the registrar, on the 20th day after the creation of the charge, decides they are non-compliant and gives notice to the company under this clause, will the charge be invalid if the company subsequently, but after the 21-day period has elapsed, delivers compliant particulars?
It is useful to compare Clause 685(6), which makes specific provision in relation to the informal correction of documents by the registrar. In July 2005, the DTI published for comment clauses corresponding to the clauses in the Bill relating to the registrar. Clause L17(4) in those draft clauses"Registrar's notice to remedy defective delivery"provided:
This clause is not repeated in the Bill. We think that it is desirable, mainly because of the problems with time limits under Section 395 of the Companies Act 1985 and the validity of charges under that section, as outlined above. However, the lack of any such clause gives rise to uncertainty and we suggest that the position should be clarified.
Amendment No. A193 deals with the same issue so far as concerns Clause 704, where the registrar may require a company to resolve an inconsistency between a document delivered to the registrar and other information already held by the registrar. The clause does not specify how the filing of a replacement document is to be treated for the purposes of, for example, late filing penalties or validity. What I have said in regard to Amendment No. A189 applies equally here. I beg to move.
Lord McKenzie of Luton: These amendmentsbased, I understand, on helpful comments made by the Law Societyraise two issues. What should the law be? And, once one has decided what the law should be, does the Bill set out the position sufficiently clearly so as to give certainty to users?
The situation we are discussing is where a company has submitted information which is in some way imperfect to the registrar, and then is required to correct that information. The question is: should the date of receipt of the information for legal purposes be the date on which the original was submitted or the date of the corrected, replacement version?
This is not a straightforward issue and, I admit, we have had to think hard about it. On the one hand, there will be instances where companies submit information which is wrong only in, so to speak, a minor wayfor example, there may be a small and inadvertent gap in the information, perhaps the lack of one name or signature amongst a series. At the other extreme, there could be instances where a company quite negligently
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submits information which is so wrong as to make no sense, or deliberately chooses to leave information incomplete in order to buy itself time when it is not yet ready to comply with the underlying obligation, in the hope that, by the time the error has been spotted and the company is asked to make the correction, it will be ready to do so.
If there were some easy way to distinguish between the trivial and innocent omissions and inaccuracies on the one hand, and significant and culpable ones on the other, then it would be tempting to write such a distinction into the law to ensure that in the former circumstances companies were given, so to speak, a "time credit"in other words, a period of grace to correct the recordand in the latter case they were not. But, frankly, such a distinction is not easy to make. I do not think it would ever be possible to construct a definition which was clear and hard-and-fast in all circumstances. Introducing some less precise formulation would almost inevitably create anomalies.
Ultimately, I think we must keep in mind the crucial importance of ensuring that companies provide prompt and accurate information which will appear on the public register. This is important to other companies in their capacity as users of the information. Any measures which enable companies to submit information knowing that they would then have a second chance to correct it, and that there would be no adverse consequence to them in getting it wrong first time, would seem to me to be unhelpful in this regard. I also think it would be unhelpful to provide, as these amendments would, that different but related provisions in the Bill should be subject to different approaches, with time credits being available under Clause 704 but not under Clause 688. For these reasons, we prefer to maintain the principle across the board that there should be no time credits.
Finally, there is the question of whether the Bill is sufficiently clear. I think it is. I accept that the draft clause which the Government published over the summer may have suggested a different treatment of this issue in some circumstances, but I hope that I have been able to set out the Government's policy clearly today. I do not think there is anything in the Bill as it is now drafted which would indicate any doubt as to the approach.
A question was raised about Clause 685. The underlying policy is the same in the informal corrections provisions as it is in the clause we have been discussing. In essence, we believe that companies must deliver the right information at the right time. I believe it is sensible to set out expressly that no time credit is involved in Clause 685. We are dealing there with an informal mechanism and it might otherwise
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not be immediately obvious in legal terms how to treat the timing of information received in, say, a phone call as opposed to a formal replacement document.
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