Economic Crime and Corporate Transparency Bill

Lord Geddes Excerpts

Committee stage
Monday 27th March 2023 Grand Committee

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, I draw the Committee’s attention to my interests as set out in the register, including as a director and person with significant control of AMP Ventures Ltd and as a person with significant control and shareholder of several other companies. I do not believe that any of these is prejudicial to my role in today’s debate. If anything, they increase my passion for the important objectives of this Bill: strengthening the UK’s business environment for the law-abiding majority while closing the doors to rogue actors.

This Bill will deliver significant reforms to the role of Companies House, making the biggest change to our system of registering companies in over 170 years. It makes significant amendments to the Companies Act 2006, the largest single Act on the statute book. It will affect the more than 500,000 companies established every year in the UK and the 5 million companies currently on the register, which have grown from 3.5 million since the last major company transparency reforms in 2015. That is quite a significant amount and no doubt bears the attention deserved in this debate.

It is therefore vital that these reforms are designed and implemented properly, both so that law enforcement can undertake its responsibilities effectively and to ensure that they benefit business and that any burdens are proportionate. I am confident that the Bill will achieve this balance and set a sensible framework that works for the benefit of businesses while bearing down on those who seek to abuse our open economy.

If noble Lords will allow, I will express my gratitude to Members in the other place, who greatly contributed to the scrutiny and improvement of this Bill as it passed through their House, not least the honourable Members for Feltham and Heston, for Aberavon and for Glasgow Central, the right honourable Member for Barking and my honourable friends the Members for Barrow and Furness and for Weston-super-Mare.

I am also grateful to Members of this House for their invaluable contributions at Second Reading and for the further views that many of them have provided since to me and my noble friend Lord Sharpe. I see that several of them will speak to amendments today. I am also grateful for the constructive engagement of Members on the Opposition Front Bench throughout and look forward to continuing to work with them. It strikes me that all the amendments proposed today and all the work we have done across this House have the same intentions. That is important. We are working together to create a better company system in this country. My thanks also go to my noble friend Lord Callanan for all his past work on these reforms as the previous Minister for this Bill, to Minister Hollinrake, my colleague at the Department for Business and Trade, and to the Security Minister for bringing this Bill through the other place so effectively.

I very much look forward to the constructive debate that we will have over the coming weeks. I am sure that all noble Lords are as keen as I am to get this important legislation on to the statute book, including delivering the long-awaited reforms to Companies House that we will discuss today. As I set out at Second Reading, I hope that all noble Lords are fully aware of the opportunity before us to make a hugely meaningful difference to businesses, law enforcement and our citizens. I trust that we can count on the continued support of the House to deliver this.

I am delighted to be starting Committee by talking to government Amendments 1, 3 and 56, which amend Clauses 1 and 81. I will start with Amendments 1 and 3. The new registrar objectives introduced by Clause 1 are a key aspect of this Bill. They are designed to empower the registrar and the activities of Companies House, acting as a clear and purposeful signal of the manner in which new and existing powers under the Companies Act will be exercised. They will embolden Companies House to be the proactive gatekeeper that many have long wished it to become.

Government amendments 1 and 3 are designed to expand the scope and reach of one of the objectives. Amendment 1 should be warmly welcomed by those who have criticised Companies House as merely the repository of an accumulation of inaccurate, misleading and potentially fraudulent information. While powers in the Bill allow the registrar to revisit and, where appropriate, remove information that ought never to have found its way on to the register that she holds, this amendment will make it absolutely clear that she must endeavour to address that historical legacy.

Amendment 3 recognises and addresses the fact that the registrar is the custodian of registers other than the register of companies. Objective 2 already puts a duty on the registrar to seek to promote the accuracy of information that is already on, or delivered with a view to being put on, the register and to seek to ensure that the register contains everything that it ought to contain. This amendment makes it explicitly clear that this applies to all the registers that she keeps, such as the register of persons of significant control and the register of overseas entities.

Government amendment 56 expands on the registrar’s new ability, introduced by Clause 81, to require information to be provided to her in order for her to determine certain matters. Importantly, it will allow the registrar to require information to determine not only whether the documents delivered to her meet the “proper delivery” requirements in respect of such things as content, form, authentication and manner of delivery but whether the underlying trigger event for the filing has really happened. For example, this amendment will ensure that the registrar can compel the production of information to determine whether a form sent in to report the appointment of a director was genuinely triggered by a real appointment and was not simply a fraudulent attempt to dupe the registrar into recording an appointment that never happened. I beg to move Amendment 1 and hope that noble Lords will support Amendments 3 and 56.

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

My Lords, before opening this debate, I advise the Grand Committee that, if Amendment 1 is agreed to, I will not be able to call Amendment 2, due to pre-emption.

[Lord Leigh of Hurley (Con)]

My Lords, I again welcome this Bill, as I set out at Second Reading. My noble friend is right: it has all-party support and is sorely needed. Likewise, it is reassuring to see the large number of amendments tabled by the Government, reflecting, no doubt, the views that your Lordships expressed at Second Reading and possibly some of those from the other House earlier.

My noble friend says that the aim is to improve the system through the legislation and I believe that my Amendment 2, supported by Amendments 55, 57 and 58, goes some way to help that. Likewise, I declare a conflict of interest, in that I am a shareholder and a director of a number of small private companies. One large company might be in the book, but they are mostly SMEs. Therefore, my relationship with Companies House is, like that of every director of every company, important. In my day-to-day activity as an investment banker, I frequently look to accounts in Companies House for information. It is an invaluable tool; compared to arrangements in other countries, particularly the United States, it is a real asset for information flow about businesses.

My amendment seeks to ensure accuracy, specifically in respect of tagging. As I explained at Second Reading, this is key. Company accounts used to be provided on paper or on a PDF, which is essentially paper form, and they are now filed using digital formats that tag each item with a label so that it can be recognised by downstream processing systems. Unfortunately, as I read it, there is no requirement in the Bill for internal consistencies, so tagging errors will not be picked up. That is needed to ensure that none of the data is self-contradictory and that it matches other data in the previous year’s accounts or tags internally to the document. I note that my noble friend’s amendment is a sweep-all amendment, covering wider matters, but the amendment that I am proposing is specific.

Perhaps it will help if I give an example. Imagine that an oligarch is a director of a company and his name, quite correctly, appears on the accounts, but the name has not been tagged or has been tagged as something other than his correct name. When a smart fraud detection mechanism is used by way of a search, that name will not emerge. Accountants will argue that the accounts are complete as the name is there, but if that name has not been tagged correctly, the filing will be of no use electronically, and therefore it is essential that the accounts are consistent internally. At the moment, the registrar can refuse to accept accounts only where they are inconsistent with outside information, so my amendment seeks to close what I see as that loophole.

I welcome the amendment to this clause tabled by the noble Lord, Lord Coaker, but I do not believe it covers my point. Likewise, I particularly welcome my noble friend Lord Agnew’s amendment, which sets the tone but, again, does not cover this point.