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Companies Act 2006 (Part 35) (Consequential Amendments, Transitional Provisions and Savings) Order 2009

Volume 711: debated on Wednesday 17 June 2009

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Companies Act 2006 (Part 35) (Consequential Amendments, Transitional Provisions and Savings) Order 2009.

Relevant document: 16th Report from the Joint Committee on Statutory Instruments.

The draft statutory instruments which we are debating this afternoon are an important part of our implementation of the Companies Act 2006. The Act reformed and clarified company law in many areas and brought company legislation together in one place. The Act makes it easier to set up businesses, gives investors greater information and confidence, and promotes shareholder engagement and effective dialogue between business and investors.

The Act has been implemented in stages and these statutory instruments relate to provisions which are due to come into force in October 2009. This staged approach gave companies time to prepare, allowed us to coincide changes with parallel EU requirements and allowed Companies House to update its systems to support the new measures.

The first debate concerns two statutory instruments relating to the Registrar of Companies. The basic functions of the registrar are set out in Part 35 of the Companies Act 2006. This largely replaces the relevant provisions of the Companies Act 1985, but it provides new powers and duties for the registrar which will help Companies House maintain the register as a useful and accurate source of information for users. The draft Registrar of Companies and Applications for Striking off Regulations supplement Parts 31 and 35 of the Act by making more detailed provision in four areas: rectification of the register, annotation of the register, language requirements and an application by a company to have its name struck off the register.

The registrar does not currently have any statutory powers to remove information from the register, although the registrar will remove material if a court order authorises it. It was recognised on both sides of this House during the passage of the Bill that more needs to be done to address the filing of inaccurate, forged or fraudulent information on the register. The Companies Act 2006 introduces two new statutory procedures requiring the registrar to rectify the register—that is, to remove material from the register under court order or under a new administrative procedure on application to the registrar. The new administrative procedure has been introduced to permit certain information to be removed from the register without a court order. It is, we believe, an important step towards a more accurate register, although I should make it clear that it is not a panacea, and that matters requiring adjudication of competing claims should be left to the courts.

Under the draft regulations, it will be possible for an applicant to seek removal of company officers’ details from the register. Companies House will follow the procedure set out in the regulations and, if no objection is received, the material will be removed. It will also be possible for companies to seek removal of material relating to changes to a company’s registered office address. We believe that the way in which the provisions of the 2006 Act are framed in relation to a company’s registered office and the grounds for rectification effectively precludes the possibility of an applicant, other than a company, making an application in respect of a registered office address and prevents the administrative procedure being used at all in respect of a registered office address provided on incorporation of the company.

An earlier draft of the regulations was withdrawn in the light of fresh evidence that some companies were purportedly appointing directors without the consent or knowledge of the persons concerned. The earlier draft addressed this issue where there was a change of directors in an established company, but the revised regulations address it also where directors are purportedly appointed when a company is first set up.

We are very conscious that the provisions of the Act and the draft regulations do not provide a full answer to issues relating to the accuracy of the register, particularly where the company has provided fraudulent information. We will consider these matters further and if solutions can be identified, we are minded to consult on possible changes to the law in this area, including to the 2006 Act in due course.

The second area where the draft regulations make more detailed provision is annotation of the register. They authorise the registrar to annotate the register where he believes that any material is misleading or confusing.

The Act contains rules about the language in which documents can be drawn up and delivered to the registrar under company and insolvency legislation. The basic rule is that they must be drawn up and delivered in English. This does not apply to Welsh companies, which can deliver documents in Welsh so long as they are accompanied by an English translation. The draft regulations relax this exception further, prescribing documents relating to certain Welsh companies that can be delivered to the registrar in Welsh without a certified translation into English. The draft regulations also add further documents to the list of documents in the 2006 Act that can be delivered to the registrar in a language other than English, provided that they are accompanied by a certified translation into English. They also provide the characters and symbols that are permitted in names and addresses.

Finally, the draft Registrar of Companies Regulations require an application by a company to have its name struck off the register to contain a declaration that there are no circumstances as set out in Sections 1004 and 1005 that prevent the application being made.

It is important to Companies House and very helpful to business to have a coherent and consistent registration system for all types of business which are required to send material to Companies House. It has therefore always been our intention to apply provisions of Part 35, relating to the Registrar of Companies, to forms of business association other than companies. Some provisions already apply generally to companies and other bodies, but others, such as certain provisions relating to electronic delivery, must be applied to other bodies to provide a coherent system. It would be possible to do this by making consequential amendments to each individual area of law, but we believe that the legislation will be clearer and simpler if we amend Part 35 to achieve this. The draft Companies Act 2006 (Part 35) (Consequential Amendments, Transitional Provisions and Savings) Order will give effect to this.

I should make it clear that the amendments made by the draft order are relatively modest in their impact, being concerned essentially with procedural and administrative matters. The draft order does not seek to extend all the provisions of Part 35 and does not seek, for example, to extend the provisions about correcting or removing material on the register.

These instruments will make an important contribution to our efforts to make the register a useful and accurate source of information for users. I commend them to the Committee. I beg to move.

I thank the Minister for introducing the order and the regulations. I welcome him to his new department. The SIs are not particularly controversial, so I shall not detain your Lordships long, but perhaps I may ask a couple of quick and rather more general questions of the Minister.

The order is an amendment to Part 5 of the Companies Act 2006. If it has taken the ever-growing Department for Business, with all the resources at its disposal, until 2009 to work its way through the complexity and conclude that there is a need for it, one has to ask what hope there is for the small businessman trying to go through the entire pile of regulation and work out whether and how each item of it affects him.

The Explanatory Memorandum to the order says, under “Matters of special interest to the Joint Committee on Statutory Instruments”, that,

“the Order amends Part 35 itself”—

that is, Part 35 of the Companies Act—

“instead of making amendments to various pieces of legislation which contain functions of the registrar in relation to bodies other than companies”.

Is it easier for the layman if it is done that way rather than by amending the various pieces of legislation? If so, it would be helpful to understand why in a little more detail. I do not ask that with any formed opinion; I would just like to know, because it is important that steps should be taken to ensure that legislation and regulation are accessible and understandable to those being regulated.

With that in mind, my final question is rather more general. What steps are being taken to codify the huge volume of extant legislation and regulation so that a layman stands a chance?

Clearly, these regulations are appropriate and relatively straightforward, although I take the point that the noble Lord, Lord De Mauley, makes about the complexity of statutory instruments under this legislation. I have two points to make. First, I very much welcome the confirmation that the Minister gave that this area will be kept continually under review. I have some scepticism about whether the appetite of Parliament, under any party, for another Companies Act will be met in the foreseeable future, after living through the last one. As the Minister said, anecdotally there is beginning to be a bit of an increase in fraudulent formation of companies, with directors’ names being used who were never directors and never actually signed the consent form—somebody else forged their signature. Recognising that that is a problem, I welcome the undertaking that the Minister has given that this will be kept under review.

My second point is on a slightly more difficult question. I am always amused by the report that we, rightly, receive on consultation outcomes, when the phrase is used,

“the proposed approach was generally supported”.

I would always like to know what objections people had who did not generally support the proposed regulations. Clearly, we will not have a statement in this document, because it has already been written, but it would be helpful if the Minister could give some indication about the objections, because they are not stated and they are not obvious to me. If anyone is sitting behind him who can summarise it for him, I would be grateful.

I wonder whether I might impudently ask the Minister one or two gentle queries on the order before us today. First, I declare a very minor interest. I look around the Committee today to find the Minister, my noble friend and perhaps one or two other noble Lords who have ground through the years to become chartered accountants. Indeed, I am reminded of the musical, “Evita”, when the young lady says, “Somebody called me something unmentionable” and an old man says, “Yes, madam, they still call me an admiral, although I left the sea many years ago”. With regard to the accountancy profession, that is very much up my street.

The Minister referred at least twice to language. I beg him not to trouble himself today, but I hope that he can answer this impudent question in writing. The Minister referred twice to the language requirements, which are mentioned right at the bottom, in paragraph 4, Section 1059A(4), Sections 1102 to 1105 and 1107(18). I think that he mentioned Welsh. I had the opportunity to serve in Northern Ireland. I do not think that any cantankerous people would wish to have financial documents in Irish—or I doubt it. Do the language requirements cover other languages? I think particularly of oriental languages such as Japanese or Chinese, let alone Vietnamese. I understand that the Minister served in Vietnam. I was curious about that; perhaps he could reassure me that there should be no problem here. He referred to Welsh, which should be the only one.

On page 4, paragraph 13 refers to Section 1109(1) and,

“voluntary transliteration of name or address into Roman characters”.

Is there a problem there? I am curious as to quite what that refers to. I am not necessarily aware of that section in the Companies Act. Could the Minister reassure me that there is no problem there? If he cannot today, perhaps he could write to me as I would not wish at any time to delay the Committee.

The starting point is that Part 35 contains a mixture of provisions that apply generally and provisions that have either more limited application or that contain references to companies but which are essentially intended to apply generally. I hope that I will reassure the noble Lord, Lord De Mauley, that it takes relatively little to amend some of the provisions so as to generalise them or make it clear that they apply generally. That is more efficient than amending other legislation simply by writing in the provisions we want to apply with very little adaptation.

Our approach leaves Part 35 as the foundation of the law about the register’s function and material sent to the register. Other legislation will build on that foundation by applying the less straightforward provisions, including those that require greater adaptation to fit particular cases. An example of that is provided by limited liability partnerships. We intend to apply most of Part 35 to limited liability partnerships. The amendment made by the draft order will provide the foundation for that.

I am not sure that that actually deals with the noble Lord’s point. Unless I misunderstood it, the point was whether it would make it easier for lay people to deal with this issue. I am looking at my officials to see whether they will say yea or nay. In the mean time, I will deal with a point raised by the noble Lord, Lord Razzall about the proposed approach being generally supported. He asked what objections anybody had. We received relatively few written responses, but both the department and Companies House discussed them in detail with our leading stakeholders. We are not aware of any areas where our approach is not supported, other than those relating to rectification, which we have already said we will keep under review. So we have nothing up our sleeves on that one.

The noble Lord, Lord De Mauley, asked whether we would codify for clarity. We will not be codifying secondary legislation made under the Act, but we will publish guidance on the websites for the Department for Business, Innovation and Skills and for Companies House. We will also work closely with our leading stakeholders and leading publishers.

As regards the point the noble Lord, Lord Lyell, raised—we will confirm this in writing just to ensure I get it absolutely right—English is the preferred language but there are allowances for other languages provided that they are accompanied by a translation. The reference to Roman characters is shorthand for the characters set out in the schedule. Only these may be used in names and addresses in documents delivered to the registrar. Not a lot of people know that.

I hope that that has dealt with all the questions. As regards the point of the noble Lord, Lord De Mauley, we believe that this will be a reasonable procedure for lay people. Proof of that particular pudding will be in the eating.

Motion agreed.