rose to move, That the Grand Committee do report to the House that it has considered the Company and Business Names (Amendment) (No. 2) Regulations 2007.
The noble Lord said: The Government made the Company and Business Names (Amendment) (No. 2) Regulations 2007 on 5 November and they came into force on the following day, and I shall explain in due course why. These regulations add the words “Government”, “NHS”, “HSC”, and “HPSS” to the list of terms that require the Secretary of State’s approval before any person with a place of business in Great Britain trades in Great Britain under a name that includes them. The only exception is if the term is part of the surname, forename, or initials of the trader doing business under his own name or one of the partners in a partnership doing business under the partners’ names. The regulations also require the Secretary of State’s approval before a company can be registered in such a name. The Northern Irish Government have a made a similar provision, so these restrictions will apply throughout the United Kingdom. As laid down in the parent legislation, and to ensure continuing effect, the regulations require approval by a resolution of each House within 28 sitting days of their coming into force.
Perhaps I may briefly explain some of the controls over all traders’ business names and over companies’ registered names. Business names are those under which anyone trades, whether the trader be a company, an individual or a partnership. There are some restrictions on the choice of business name. These are not many, but they are important for the protection of the public. For example, a trader cannot use a business name ending in “plc” unless, of course, it is a public company registered under that name. A similar restriction applies to the use of the word “limited”. Traders must have the Secretary of State’s approval before they carry on business under certain names. Prior approval is required for names that suggest a connection with Her Majesty’s Government or a local authority and for a name that includes a word or expression specified in regulations. As regards business names, for some terms, the regulations require the applicant to seek the views of a specified body before seeking the Secretary of State’s approval.
A company’s registered name is its legal name. It is the name under which a company appears on the index of company names held by the Registrar of Companies. There are more controls on company names than on business names to ensure that each company name is unique. It is in addition to the requirement for approval before registration for a company name that suggests a connection with Her Majesty’s Government or a local authority or includes a specified word or expression. This requirement is very similar to that for business names. It is for the same purpose; that is, the protection of the public.
In practice, when prior approval is required for either a company’s registered name or business name, the application is considered by the Registrar of Companies on behalf of the Secretary of State. The registrar may take account of the views of others whether or not the regulations require the applicant to seek the views of a specified body with regard to the proposed use of a particular word or expression.
The regulations specifying the words and expressions that require prior approval are made under the Business Names Act 1985 and the Companies Act 1985. The specified words include words which imply national or international pre-eminence, such as “British”, “international” and “European”; words which imply business pre-eminence or representative status, such as “association”, “council”, and “federation”; words and expressions which imply specific objects or functions, such as “trade union”, “stock exchange” , “register” and “trust”; certain other words which could be used in names so as to mislead the public, such as “police”, “abortion” and “university”; and, since 6 November, the words we are considering, “Government”, “NHS”, “HSC”, and “HPSS”.
The purpose of the regulations is to protect the public. In the case of the word “Government”, it is to prevent people from being misled into believing a company or business has a connection with a foreign government. Those protected are not just individuals, but also other businesses. There is a real risk of financial damage when a business pretends to an official status. The word “Government” has an implicit meaning of authority and responsibility attached to it above and beyond any business or company, which is why we have added it to the list of sensitive words and expressions.
As for “NHS”, the purpose is particularly to protect patients from unscrupulous persons passing themselves off as part of the National Health Service. I fear that there already exist some companies and businesses whose names have clearly been chosen to exploit the trademark “NHS”. The Department of Health has had discussions with those concerned.
The regulations do not apply to either companies incorporated or to persons carrying on business in Northern Ireland, but there is no geographical restriction on companies’ operations. There is a real risk that those unable to exploit “NHS” would turn their attention to the Northern Irish equivalent. Healthcare in Northern Ireland is provided by Health and Social Care in Northern Ireland, which until recently was called the Health and Personal Social Services—thus “HSC” and “HPSS”. The use of either “HSC” or “HPSS” as part of a company or business name could foster dangerous confusion amongst patients, service users and the wider public between genuine NHS, HSC or HPSS services and others seeking to use these terms in their business or company names in an attempt to capitalise on the reputation of the genuine services.
Earlier this year, Northern Ireland made a similar provision for “Government” and the other words. The regulations do not prohibit the use of these prescribed terms in company or business names, rather it is a requirement for prior approval. In considering whether to give approval, the public interest is paramount. Existing businesses and companies will be affected by these regulations only if they seek to change their name.
The regulations are unusual in that they are subject to approval after being made. That not only enables the Government to act quickly, it prevents an opportunist registering a company in a name that is about to be prohibited. If the regulations are not approved by both Houses within the specified time, they will cease to have effect, which would leave open the possibility of the public being misled. I apologise for taking a bit of time to move this regulation, but it is slightly unusual and, I hope, is of interest to Members of the Committee. I beg to move.
Moved, That the Grand Committee do report to the House that it has considered the Company and Business Names (Amendment) (No. 2) Regulations 2007. First Report from the Statutory Instruments Committee.—(Lord Bach.)
I have a sense of having been hit repeatedly over the head with a rather heavy hammer. I thank the Minister for that extremely thorough explanation of this technical piece of company law. The noble Lord, Lord Razzall, and I are Companies Act 2006 freaks. We spent 14 or 15 happy days in this room. This presumably now moves into the 2006 Act. It is referred to here as Section 29(1) of the Companies Act 1985. I assume that there is a schedule of derivations and destinations which will tell us where it ends up in the 2006 Act. Can the Minister tell us where this information ends up in the 2006 Act? It would be very helpful if the Minister’s officials could send an updated list of derivations and destinations to those of us who are participating today. We shall return to these issues in future debates and it would help us to produce sensible questions and comments for the Minister if we could have that information.
That having been said, it is clearly sensible that there should be a power to stop individuals and companies being set up in a way that gives greater weight to them or implies associations that do not in fact exist. I also understand the pre-prohibition requirement to stop the unscrupulous dashing in during the gap between the regulations being published and coming into force. My only surprise is that we have got as far as this without the words “Government” and “NHS” being on the list. I know that “royal” and “national” are on the list because I was once involved, along with the Bank of England, in setting up a company with the word “national” in its title. It took an inordinate amount of time to unravel it, even though the Bank was keen on the formation of the particular company.
I have one query on the detail of the regulation. Paragraph 2.3 of the Explanatory Memorandum states:
“The Regulations will not affect any company that already has a name including ‘Government’ or ‘HPSS’, ‘HSC’ or ‘NHS’”.
The same goes for any business. There is no retrospective effect in these regulations. Am I right in believing that if an organisation has such a name in its title, it has got it? I ask this because if it is retrospective, that is another issue. The paragraph goes on to state:
“There is a transitional provision for those to whom such a business is transferred”.
“Transferred” is an interesting word. What does it mean, because transfer can occur in several ways? It could be an outright sale of the business that carries the name, a change of owner with a new beneficial owner taking over the assets of the business, or it could just be part of a corporate reorganisation whereby a body is transferred from one subsidiary of the group to another with no effective change in ownership or control. It seems unfair because a company’s name is an asset acquired in good faith and therefore possibly capable of sale, but certainly to prohibit a transfer within a group of companies with no change in ownership would be unduly restrictive. Perhaps the Minister could explain the background to this and give details of the proposed length of any transitional period. I do not see the length of the transitional period set out in the Explanatory Memorandum, although I may have missed it.
Before I conclude, I want to stray a fraction wider. We are considering here a regulation which is going to be administered by Companies House. There is, of course, some controversy about Companies House and its ability to handle its existing duties under the Companies Act 2006. The Minister will have seen the Financial Times of 8 November reporting that:
“Companies Act put on hold until 2009”.
A large measure of that is that Companies House, despite the fact that we have been considering the changes arising from that Act for something between seven to nine years, is unable to meet the timetable that the Government originally gave.
That is not an academic point, because when we considered the Companies Bill in Committee, we learnt of scams from overseas boilerhouses, which got hold of lists of private shareholders and cold-called them to sell them shares in one company or another. It is unsatisfactory that people should be able to prey on the unsophisticated and the vulnerable, and, as I said, we received a number of examples of that during Committee consideration of the Bill. It is disappointing that we will not be ready to make the appropriate changes until 2009. As 2009 will be 365 days long, perhaps the Minister can tell us whether he thinks that it will be January 2009 or December 2009, because there is quite a big difference. I appreciate that that is outside the exact detail of the regulation, so if he wants to write to me, I shall be delighted, but we need to keep the pressure up on that point.
If the Minister is going to write, he will be aware that a number of other issues about the implementation of the Act are starting to cause major concern within the legal community. I should be extraordinarily grateful if he could respond on the issue of the chairman’s casting vote, which is apparently disappearing; the question of limited liability, where the new model articles apparently do not contain a reference to limited liability, which is required to make a company limited under the new Act; and, most technically, the interplay between Sections 152 and 323, which appears to prohibit a custodian from voting shares for which he or she is responsible both for and against. If he or she is acting for more than one investor, one investor may say, “Please vote for this”, and another may say, “Please vote against”. The way in which the Act is now being interpreted is that it is not possible to do that, you can vote only one way. That is one problem that we have with the proposal to require institutions to explain how they have voted.
I will not weary the Committee with the detail of that rather technical point, but there was an article in the Times on 6 November headlined,
“Investor protest as ‘simplified’ company law prevents free votes at AGM”.
I have had a couple of letters from major institutions explaining their concerns about that. Time is of the essence as the juggernaut of implementation rolls on, so if the Minister were able to give us a little more visibility on those other issues, that would be extremely helpful. We have no problem with the regulations as they stand; we understand why it has had to be done post-event; but it would be helpful if he could say something about the issue of transfer and what that means precisely.
I was simply going to say that we on these Benches agree with these eminently sensible regulations. I cannot resist commenting with admiration on the ability of the noble Lord, Lord Hodgson, to ask the Minister questions that have absolutely nothing to do with the regulations.
I share with the noble Lord, Lord Razzall, his admiration for that ability of the noble Lord, Lord Hodgson. Not being a veteran of the Companies Bill, now the Companies Act, I begin to see how it has marked all those who took part in its many days of consideration.
The new powers are to be found in the Companies Act under Section 55, which covers company names, and the other section is—wait for it—Section 1,194, for business names. I hope that that answers the first question of the noble Lord, Lord Hodgson. On the question about retrospective effect, there is none. On transfer, the expression in Section 2(2)(b) of the Business Names Act 1985 places no restriction on the meaning of the word “transfer”.
On most of the points made by the noble Lord about the Companies Act, I will write to him. I cannot promise to answer all the questions that he posed to me today, but we will have a good look at them to see whether we can help and of course we will distribute the letter that we write to him to the noble Lord, Lord Razzall, and other veterans of that campaign.
The final implementation date of the Companies Act is 1 October 2009, so the noble Lord, Lord Hodgson, now knows which of the 365 days of that year has been chosen. I am not in a position to answer his other questions on the Companies Act; I do not think that he would expect me to do so.
Will the Minister’s letter explain transfer? That was an extremely elegant glide down for an easy single to third man, if I may use the cricketing term, in the sense that it did not actually say what transfer meant. Does it require a change of control or not? Is an intra-company transfer from one subsidiary to another okay but outright sale not okay? I understand that that may be a difficult question for him to answer on the fly, but it would be helpful if we could have it clear in any letter that the Minister will write.
That will certainly be included in the letter. I thank both noble Lords for their support.
On Question, Motion agreed to.