Economic Crime and Corporate Transparency Bill

Committee (1st Day)

Clause 1: The registrar’s objectives

Amendment 1

1: Clause 1, page 2, line 2, leave out from “that” to end of line 3 and insert “information contained in the register is accurate and that the register contains everything it ought to contain.” Member’s explanatory statement Objective 2 currently focuses on the accuracy and completeness of documents delivered to the registrar. The amendment would expand it to refer to the accuracy and completeness of the register more generally. This would, for example, be relevant not only to the acceptance of documents for registration but also to their removal.

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.

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.

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.

My Lords, I have tabled Amendment 63 to Clause 90. I refer to my interests as set out in the register. I am a director of several companies and a person with significant control of an LLP, so I have had a lot of interaction with Companies House over the years.

My amendment might sound rather anodyne, but the amendments I have tabled to the Bill are the first building blocks of the transformational change that will be needed in Companies House once this Bill has been passed. We are taking an organisation that ever since its creation has simply been a passive receiver of data and has never had any cultural inclination to challenge it. This Bill changes that, which we welcome, and I am most grateful to my noble friend the Minister for all his positive engagement so far. What I am asking for here is a direct and specific requirement for the registrar to construct a process that will enable her essentially to triage the cases that are coming through the system. As my noble friend the Minister said, there are 5 million companies on the register and some 300,000 to 400,000 new companies are created annually.

When the Bill is passed we will have a problem with what I call stock and flow—in other words, a huge cleaning-up operation of the 5 million companies that are already there will be needed, and that will take some time. We also need to ensure, as quickly as possible after the Bill has passed, that the new registrations coming through are of the highest standard possible. Essentially, I am asking for the registrar to be required to make a risk assessment of new companies being created. One example that is well known in the financial word is that of Danske Bank in Denmark, which was the largest ever anti-money laundering fraud case in Europe, worth some €200 billion. Much of that started here through our LLP and LP structures. It would not have been difficult to have seen that there were trends among a lot of the LLPs that were being created. Many of them were coming from the same registration agent and with similar, often the same, addresses. That would have been a serious red flag that could have been investigated.

My Lords, I thank the noble Lord, Lord Johnson, for his introduction today, and I acknowledge the work of the noble Lord, Lord Callanan, on the previous Bill and in the run-up to today. I am very sorry that my noble friend Lord Fox is unable to be here to help kick off proceedings. I am merely his understudy today—but he will, I am assured, be back with a vengeance after Easter.

Much was promised in the first economic crime Bill, as the price for our passing it at speed, and not all these promises are met in the Bill as it now is. That is particularly the case as regards enablers, SLAPPs, whistleblowing and asset seizure, and that is where my noble friend Lord Fox, and my other noble friends in due course, will focus as the Committee progresses. But we welcome the Bill as far as it goes, and in particular Part 1, which expands the role and powers of the registrar and improves the integrity of the registers held at Companies House. We support the noble Lord, Lord Leigh, who is very good at finding practical ways to make company-facing legislation work, as we have seen on previous Bills.

On these Benches we support the Government’s amendments and the other amendments proposed, but I qualify any support by saying that the culture of Companies House needs to change as well as its powers and duties. That was a point extremely well made by the noble Lord, Lord Eatwell, when we discussed the last economic crime Bill. That means, I believe, the introduction of a risk assessment and enforcement culture, which the noble Lords, Lord Agnew and Lord Vaux, and other noble Lords have highlighted throughout.

As the noble Lord, Lord Agnew, says, Companies House was previously a passive receiver of data. That is why, among the other amendments in this group—although they are welcome—Amendment 63 to Clause 90 is so important. It predicates a much more proactive and inquiring approach by the registrar, which has not been part of Companies House culture to date. That is very strongly supported by Transparency International and UK Finance, which says that there is a need for Companies House to become a “proactive gatekeeper”—a very useful phrase.

The amendments in this group would be greatly enhanced by supporting that amendment from the noble Lord, Lord Agnew, as well as the other amendments in his name, as we go forward to the next groups.

My Lords, I start by thanking the Minister and his colleagues for their approach to the Bill and for his remarks at the beginning, which were very welcome. We all have an interest in trying to ensure that the Bill works, so I thank the Minister for his comments about that—and I can reciprocate with regard to how the Government have approached this in trying to enhance and improve the Bill. I appreciate what the Minister said about the amendments in this group, and all the various amendments that have been introduced, as we have heard, in a positive way, in seeking to improve the Bill.

I do not intend to speak at great length about the various amendments. I start by thanking the noble Lord, Lord Leigh, for his support of my Amendment 4 and by saying that I very much agree with much of what the noble Lord, Lord Agnew, said on his Amendment 63. Essentially, what we are saying here is that the Bill has a lot within it that we appreciate, accept and think are important steps forward—but alongside that, most of us want to see the Bill having some teeth and the Government explaining to us how the various details are laid out, how the measures will be enforced and how we will see the change of culture that we have just heard about.

I will speak specifically to my Amendment 4. Noble Lords will see that, in essence, we are probing what the Government’s intentions are. Clause 1 has four objectives for the registrar. The amendment in my name and those of my noble friends Lord Ponsonby and Lady Blake seeks to understand whether anything could be gained by inserting a new objective 5. No doubt the Minister will say that objective 4 means the same, which may be why the amendment in the name of the noble Lord, Lord Agnew, is not needed. We are suggesting that there needs to be a more proactive statement in the Bill about what the Government are seeking in terms of the information that the registrar collects and how it is then assessed to see whether it should be shared more widely, particularly with the various enforcement bodies.

I had not intended to speak on this group, but my noble friend Lord Coaker has drawn my attention to the active verbs in the subsections of Clause 1. I am at a loss to understand why they are used. Why is objective 3

“to minimise the risk of records kept by the registrar creating a false or misleading impression to members of the public”

and not “to prevent companies and others carrying out unlawful activities or facilitating the carrying out of unlawful activities”? It seems odd that the objective is not the complete protection of people who may be duped or defrauded or have their money stolen from them by the devices created here. I appreciate that one cannot guarantee perfection, but it seems to me that by legislating in this fashion we recognise that there will be an element of that, since the objective we set the registrar is only to minimise, not to prevent it altogether.