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30 Mar 2006 : Column 357

Thursday, 30 March 2006.

Grand Committee

The Committee met at two of the clock.

[The Deputy Chairman of Committees (LORD BROUGHAM AND VAUX) in the Chair.]

Company Law Reform Bill [HL]

(Twelfth Day)

Clause 699 [Material not available for public inspection]:

Lord McKenzie of Luton moved Amendment No. A191B:

The noble Lord said: Amendment No. A191B provides that where an oversea company is required by regulations under Clause 661 to register particulars of an individual's usual residential address, then any application or other document delivered to the registrar under regulations corresponding to the provisions of Chapter 8 of Part 10 must not be made available for public inspection. This affords the officers or representatives of an oversea company the same protection as is available to directors of a UK company in respect of non-disclosure certificates for residential addresses. I beg to move.

On Question, amendment agreed to.

Lord McKenzie of Luton moved Amendment No. A191C:

"( ) any court order under section 706 (rectification of the register under court order) that the court has directed under section (Powers of court on ordering removal of material from the register) (powers of court on ordering removal of material from the register) is not to be made available for public inspection;"

On Question, amendment agreed to.

Clause 699, as amended, agreed to.

Clauses 700 and 701 agreed to.

Clause 702 [Certification of copies as accurate]:

Lord Sharman moved Amendment No. A192:

"( ) Regulations under this section are subject to the negative resolution procedure."

The noble Lord said: The purpose of Amendment No. A192 is to specify how the regulations under Clause 702 should be made. Clause 702 permits the Secretary of State to make regulations as to the manner in which certified copies are to be provided in electronic form under the clause. The clause fails to state the parliamentary procedure by which such regulations are to be made. Clause 873(3) of the Bill
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contains a default provision where no procedure is specified, but we suggest that the clause should make specific provision. I beg to move.

Lord McKenzie of Luton: As the Government set out in their memorandum to the Delegated Powers and Regulatory Reform Committee, this power to prescribe the manner of certification of electronic copies is essentially a matter of technical detail and no parliamentary procedure is considered necessary. The Committee agreed that this approach was appropriate and, therefore, I hope that the noble Lord will not press the amendment.

Lord Sharman: I thank the Minister for his reply. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 702 agreed to.

Clause 703 agreed to.

Clause 704 [Registrar's notice to resolve inconsistency on the register]:

[Amendment No. A193 not moved.]

Clause 704 agreed to.

Clause 705 [Administrative removal of material from the register]:

Lord Hodgson of Astley Abbotts moved Amendment No. A193A:

The noble Lord said: This is a simple amendment intended to improve the clarity of this clause. It would be far clearer if the clause read, "The registrar may remove from the register anything that the registrar had power, but not duty, to include", instead of, "anything that there was power, but no duty". As currently drafted, it is uncertain what or whose power is being referred to. It could mean, for example, the power of primary legislation, which would give the registrar power to remove anything he wished. I am sure that that is not what the Government intend. This amendment would make it clear that the powers referred to are those that the registrar, and no other body, holds. I beg to move.

Lord McKenzie of Luton: I have heard what the noble Lord said, but we are not persuaded that the wording would be an improvement. Indeed, it arguably introduces a lack of clarity to the clause by seeming to imply that somebody other than the registrar has power to include things on the register. The risk is not great but, since the amendment does not seem necessary, we are not keen to accept it. It is an issue of drafting, and parliamentary counsel has a different view.

Lord Hodgson of Astley Abbotts: I am grateful to the Minister. I accept that, but for parliamentary draftsmen to say that inserting "the registrar had" power is making it less clear, by making it implicit that somebody else might have the power, seems to fly in the face of reality. This is a practitioner point, in that
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it looks as though the clause could go wider than the Minister says that the Government intend. We thought we would make up for that. We are obviously not going to argue about this today, but I hope the Government will think carefully about it, because clarity is important. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 705 agreed to.

Lord Hodgson of Astley Abbotts moved Amendment No. A194:

(1) The Secretary of State may by regulations make provision for the registrar, on application, to remove from the register any material that derives either from anything done without the authority of the company or from something that is forged.
(2) Regulations under this section are subject to the affirmative resolution procedure."

The noble Lord said: Amendment No. A194 inserts a new clause,

after Clause 705. This has been raised with us by the Institute of Chartered Accountants in England and Wales. Even given the proposed powers mentioned while speaking to Amendment No. A191, intended to reduce instances of identify theft, we have concerns about the ability of Companies House to correct the register where fraudulent filings have been made. We understand that where Companies House has been informed of such identity thefts, it does not have the power to amend the public record—to remove the fraudulent entry—unless the applicant has made a successful application to court. It does not appear that Companies House will have the right to do so without a court order under this Bill.

Clauses 704 to 706 give Companies House powers to correct the register. Clause 704 is an administrative power, enabling the registrar to correct inconsistent filings. Clause 705 gives the registrar the right to remove superseded, out-of-date or unnecessary material. Clause 706 gives the registrar the right to remove material pursuant to court order. These provisions do not appear to give Companies House the power to remove documents which have been submitted fraudulently, or without the consent of a person to whom they relate unless the affected person applies to court. Naturally, such recourse to court is cumbersome, expensive and time consuming.

The amendment would introduce enabling provisions which could be used to introduce a power for the registrar to update the register where an application is made to Companies House for the removal of fraudulent or unauthorised material. With increasing instances of identity theft, such enabling provisions are important, in that they introduce measures to ensure that the public record is reliable.

We accept that any such regulations would need to provide for safeguards and a sufficient level of due process to ensure that documents are not
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inappropriately removed from the record. For instance, this could be guarded against by inserting a requirement for them to be accompanied by clear evidence, sworn on affidavit, that a document is unauthorised or forged. We further acknowledge that any such mechanisms could leave Companies House as arbiter in disputes between disgruntled directors. Consequently, it is important for there to be a proper parliamentary debate on the balance to be struck in introducing a wholesale power for the registrar to correct unauthorised or fraudulent entries on the register, thus keeping it up to date, and avoiding giving the registrar any discretion; hence our proposal for these regulations to be subject to the affirmative resolution procedure.

In order to reduce the likelihood of the registrar becoming embroiled in disputes, the application procedure could include a requirement that the correction is not disputed. For instance, before cleansing the record, the registrar could be required to give companies and other named persons the opportunity to challenge a request for something that relates to them to be struck off the record. If such a challenge is received, a court order could then be required to authorise the removal of the relevant material. Obviously, the argument against such a requirement to notify the parties is that it would alert the perpetrators of the fraud that it has been uncovered. That might hamper law enforcement.

However, we believe that this is an important power for Companies House and the registrar to have and, therefore, I beg to move.

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