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Companies (Disclosure of Address) Regulations 2009

Volume 706: debated on Thursday 15 January 2009

Motion to Approve

Moved By

That the draft regulations laid before the House on 18 November 2008 be approved.

Relevant document: First Report from the Joint Committee on Statutory Instruments.

My Lords, we are today debating two sets of draft regulations under the Companies Act 2006: the draft Companies (Disclosure of Address) Regulations and the draft Companies (Trading Disclosures) (Amendment) Regulations. During the parliamentary passage of the Companies Bill, noble Lords were concerned that directors’ home addresses should be protected. At Lords Report stage, we amended the Bill on the basis of a scheme suggested by the Association of the British Pharmaceutical Industry. I am pleased to recall that there was cross-party support for the revised scheme.

Under the 2006 Act, when a company notifies Companies House of the appointment of an individual as a director, it will have to provide both a service address and a home address for the director. Only the service address will be placed on the public record. Addresses already on the public record will continue to be available from Companies House. The Act provides, however, for these addresses to be made unavailable for public inspection.

Clearly, it is not possible to retract information that is already in the public domain or available from secondary sources. However, these regulations provide the procedures for an address to be made unavailable for future public inspection when there is a serious risk of violence or intimidation to the person to whom the address relates. Company directors and secretaries, both past and present, will be able to make applications regarding the protection of their home addresses as they appear on the public record. Companies will also be able to make applications covering the addresses of their members. Those, such as creditors, who have registered charges against a company will also be able to apply.

Addresses that have been made unavailable for public inspection will still be held by the Registrar of Companies but will be disclosed only under a court order. For reasons relating to the technology used by the registrar, only addresses filed since January 2003 will be able to be made unavailable for public inspection. Removing older addresses is not possible without endangering the integrity of the public record.

From 1 October 2009, every address that is filed as a director’s home address will be protected information. It will not be available for public inspection. Protected information may be disclosed by the registrar only to credit reference agencies and to specified public authorities. The draft regulations also provide the conditions for disclosure of protected information to these bodies.

In addition, the regulations provide the procedures for a director to apply for higher protection for his or her home address so that it is not disclosed to credit reference agencies. This higher protection will replace the confidentiality order regime under the Companies Act 1985. Any director who has a valid confidentiality order on 30 September 2009 will automatically be granted this higher protection.

The public authorities that are specified in these draft regulations are the regulatory and enforcement bodies to which the home addresses of directors with confidentiality orders may be disclosed, plus those other public authorities that currently rely on this information being made publicly available by Companies House. Before the registrar discloses protected information, he must be satisfied that the protected information will be used only for the purposes specified in the draft regulations.

The main condition for disclosing any director’s home address to a specified public authority is that it intends to use the information only for carrying out its public functions. The registrar will disclose to credit reference agencies only the home addresses of directors who have not been granted higher protection. The credit reference agencies must intend to use the information for assessing financial status, for conducting checks for conflict of interest, for the prevention and detection of crime and fraud or for meeting obligations under the money-laundering regulations.

Passing protected information to anyone not entitled to get it directly from the registrar would be considered by the registrar to be a breach of the conditions. It would, however, be acceptable for a credit reference agency to use protected information to confirm an address supplied to its client by a director or by a company on a director’s behalf.

We are also debating draft regulations that amend the Companies (Trading Disclosures) Regulations 2008. Those regulations require every company to include its registered name in its business communications and documents and in signs at all its premises.

A company is a being created by law and its name or registered number is needed to identify it. Companies have, therefore, always been required to display their names at their premises. This is particularly important at the registered office, as that is where documents can be served on the company. The sign is also greatly needed at any place where the public may inspect the company’s records.

The 2008 regulations provided two exemptions from the requirement for signs: first, if the company has never traded and, secondly, if the premises are primarily used as living accommodation. This second exemption is available only if the premises are not the company’s registered office or where its records can be inspected.

The draft regulations add two further exemptions. The first is for those companies whose activities lead to a serious risk of violence or intimidation to its directors or employees. The eligibility for this exemption is based on the criterion in the draft disclosure of address regulations for a director to apply for his home address not to be disclosed to a credit reference agency. This criterion relates to risks arising from a company’s activities. Clearly, if a company’s activities lead to such risks for all its directors, it is likely also to lead to risks to its employees. This exemption is from the requirement for a sign at premises that are not the company’s registered office or where the records can be inspected. The second exemption applies only if a liquidator or administrator has been appointed to the company and that liquidator or administrator’s office is the company’s registered office or where its records can be inspected.

These draft regulations have in common the recognition of the need to strike a balance between the safeguards required and the public’s right to information. I commend these draft regulations to the House.

My Lords, I thank the Minister for introducing the regulations. I shall deal first with the Companies (Trading Disclosures) (Amendment) Regulations 2008. We all, I think, understand that these regulations introduce two exceptions to the requirement on every company to display its registered name at each of its premises. The first exception is in the case of insolvency, as I understand it. The second relates to the protection of sensitive locations. We understand these exceptions and are, I think, broadly happy with them.

I have one minor question, which relates to the second exception. That exception specifically does not extend to the company’s registered office or inspection place for its records. I may be missing the point, but perhaps the Minister could inform your Lordships how, if the company’s business is considered sensitive enough for it not to be required to display its registered name at its other premises, it is proposed that those locations—the company’s registered office or inspection place for its records—which are not covered by the exception should be protected.

We understand that the Companies (Disclosure of Address) Regulations are principally about protecting those who are involved with companies that might, for instance, be targets of militant animal rights groups. Of course, we all agree with that aim. However, your Lordships will be well aware that there are people, effectively serial company directors, who regularly establish or take on directorships of companies which then fail and whose creditors lose everything that they are owed, only for those directors to repeat the process time and again. This is likely to be an increasing feature of our commercial world as we go further into recession. Perhaps the Minister could inform your Lordships what procedures are in place to prevent such people from sheltering behind the procedures envisaged in the regulations to avoid the responsibilities of a director of a limited company.

My second point is related. It is claimed by those who will be directly involved in the process that the regulations could make the process of banks lending to business even more difficult than it is now, first, because of the additional steps required in the process of verifying financial standing—address checking being a key part of that process—secondly, because of the additional obstacles that will be put in the way of banks’ fraud detection teams and, thirdly, because this will clearly hinder the detection of money-laundering. All this seriously risks slowing down, yet further, the credit approval process at precisely the time when we and the Government want the banks to speed it up.

Much of this, we think, could be resolved with a very simple adjustment to what is laid down in the regulations. The credit reference agencies, which are permitted access to the restricted register for very specific purposes, and the other, mainly government-controlled agencies, such as Companies House, could be permitted to confirm an address on the restricted register to a named party if, and only if, the director in question consented in writing. Those who are going to have to work with these regulations are convinced that the current drafting does not allow that. I therefore ask the Government to consider their position on this. It is not a matter for party politics, and I know that the Government share with us a strong desire to make the process of banks lending to business easier rather than more difficult, while of course protecting individual directors.

I do not want to detain your Lordships now but I have more information on the specifics of the perceived problems and suggested solution which I should be pleased to share with the Minister if that would be helpful. In the mean time I—and, I sense, a large number of lenders—await the Minister’s response with great interest.

My Lords, I am afraid that these are rather unhappy regulations in that they have come out of a rather bad situation—that is, people effectively being persecuted by certain groups for carrying out legal activities. I think of the Huntingdon Life Sciences Company lobby. Unfortunately, extremists got hold of a cause in which there had been a respectable tradition of protest—even if you did not agree with it—and the company was then corrupted and almost destroyed in the public’s estimation. Therefore, I think we all agree that these regulations are not brought forward in happy circumstances.

The regulations are definitely a necessary evil, as has been proven over a long period for those concerned. However, the points that the noble Lord, Lord De Mauley, has just made are relevant in relation to the question of what guidance is available for the normal process of commerce that is allowed to take place. Has some consideration been given to that? We need to bring in these regulations but we need to ask what ways there are round them. I should be interested to know whether the Government have considered these matters.

It was suggested to me that being able to check criminality in trading practices might cause a problem. I do not think that it would be a big enough problem to outweigh the fundamental need to ensure the safety of the people behind it, but I wonder whether the Government have considered that they might have to deal with that. I realise that it is a circle that has to be squared but I should just like to hear how far the thinking has gone on that. It is a shame that the regulations have to be brought forward but I wish them well.

My Lords, I thank the noble Lords for their contributions. Taking them in order, I turn, first, to the question of exemptions. There is no exemption for registered offices, as their purpose, under company law, is to be the company’s point of contact with third parties. The same argument applies where companies choose to keep their records available for inspection at a location other than at their registered office. Of course, many of those are accountants’ offices and other premises not directly associated with the trading company. That possibly is the solution to the first question.

The second question concerned people who make a career out of being directors of companies that fail and then immediately reappearing as directors of other companies. The 2006 Act provides that a court may order disclosure on an application of a liquidator or creditor where necessary. I think that, until events prove differently, we would rely on that as a solution.

To turn to the third and major point made by both the noble Lords, Lord De Mauley and Lord Addington, in principle there is probably nothing between us. We do not want banking to be made more difficult in the present circumstances for small and medium enterprises—or even for large ones. The issue was brought forward by the British Bankers’ Association, but the Committee in the original passage of the legislation recognised the need to strike a balance between the register being useful to those attempting to prevent crime such as money-laundering while preventing it being useful to those attempting to commit other crimes such as serial fraud by serial directors of companies. In that sense the balance is thought to be correct. The banks are particularly concerned that they may no longer be able to link directors to the addresses used. However, dates of birth are generally more reliable for this purpose than names. The banks are also concerned about not being able to contact someone who has given a personal guarantee on an agreement. The 2006 Act provides that if the service address is not affected by a court order the disclosure of the director’s usual residence can be made.

Some of the banks’ concerns are misplaced. They will still be able to contact company directors and the public record will show where the director was appointed. If, however, as the noble Lord indicated, he has additional information, and given that we are not holding up the progress of these regulations, I shall be more than happy to speak to him outside. I commend the regulations to the House.

Motion agreed.