Margaret
Hodge: Any amendments—I am the first to admit this,
having taken other Bills through the House—by Government at a
late stage are always resisted by Ministers unless they are necessary.
[Interruption.] No, unless they are absolutely essential and
should have been thought through before.
Today’s Government
amendments come out of debate with people in the legal profession and
the associations we have consulted, as well as out of debate in the
House of Lords. That has been part of the inclusive way in which we
have tried to develop the Bill, and the hon. Gentleman should welcome
that, but instead he laughed. When I have led on other Bills, I have
been resistant to amendments because it would have been bad for the
Government to accept them. In this instance, we are responding to
legitimate concerns raised either in the debates elsewhere or by
professional associations, and the hon. Gentleman should welcome that.
The Government amendments reflect the debate
elsewhere.
Mr.
Djanogly: I hear the Minister’s explanation, but
the proposals are not new. They went through the CLR and were consulted
on for six or seven years in one way or another. Here we are seven
years later and I think—the Minister will tell me if I get this
wrong—that the amendments were tabled last week. To say that we
have had a good period to review them is
wrong.
Margaret
Hodge: Is the hon. Gentleman therefore suggesting that the
idea that we should not impose on private companies the obligation to
have a company secretary has been disputed for the last seven or eight
years, or that there has not been consensus? Does he not accept that
that deregulatory move has been welcomed warmly by most of those with
an interest, which was the original drive behind the
proposal?
Mr.
Djanogly: Warmly welcomed or not—and I shall not
pre-empt a debate on part 12—the fact remains that the knock-on
effects of policy decisions such as those we are debating on the
signing of documents have not been thought
through.
Margaret
Hodge indicated
dissent.
Mr.
Djanogly: I am afraid that that is the implication of the
amendments having been produced in the past few days. We have concerns,
and in the past two days I have received about 30 letters from
concerned company secretaries. I feel it fair and just that these
concerns be
put.
Vera
Baird: I hope that the hon. Gentleman does not feel that
we are ganging up on him. We are keen to respond to problems that have
arisen from measures that we saw as increasing flexibility, and to meet
the concerns that have been expressed by increasing that flexibility
even more. The thrust of the hon. Gentleman’s earlier argument
was the difficulty of moving from a current situation in which duties
are set out clearly to a new flexibility, and whether the transitional
period will be confusing, particularly when mixed with any confusion
that might arise from the provisions before us. However, the provisions
are clear:
a company may appoint anybody it wishes to be an authorised signatory
and they need only be registered. That cannot be something to complain
about. My right hon. Friend has made it clear that because there will
be an awkward transition period, we will consult heavily as we go
along. The hon. Gentleman should be
content.
Mr.
Djanogly: I wish I could say that I was content. I am not,
although I am grateful for the pledge of further consultation, which
will be necessary. Company secretaries are valued and useful people,
and we do not believe that they have been treated appropriately by the
Government. Their views must be given a full airing, and we will make
that point later in our proceedings. I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn. Amendments
made: No. 76, in clause 12, page 6,line 3, at end
insert— ‘( ) any
person who is to be appointed as an authorised signatory of the
company.'. No.
77, in clause 12, page 6, line 4, leave out from ‘stated' to end
of line 7 and insert ‘— ( )
in the case of a director, in the company's register of
directors and register of directors' residential addresses (see
sections 147 to 151); ( )
in the case of a secretary of a public company, in the
company's register of secretaries (see sections 260 to
262); ( ) in the case
of a person appointed as an authorised signatory, in the company's
register of authorised signatories (see sections (Register of
authorised signatories) to (Particulars to be registered: power
to make
regulations).'. No.
78, in clause 12, page 6, line 9, after ‘secretaries,'
insert ‘or as an authorised
signatory,'.—[Vera
Baird.] Clause
12, as amended, ordered to stand part ofthe
Bill.
Clause
13
statement of
compliance 11.15
am
Mr.
Djanogly: I beg to move amendment No. 15, in clause 31,
page 12, line 19, after ‘a', insert
‘public'. Clause
13 deals with the statement of compliance. It relates to section 12(3)
and (3)A of the Companies Act 1985. Based on recommendations of the
CLR, the current requirement of a statutory declaration or a chronic
statement here and elsewhere in the Bill is replaced by a requirement
to make a statement of compliance. This statement does not need to be
witnessed and may be made on paper or in electronic form. It will be
for the registrar’s rules under clause 75 to specify who makes a
statement and its form. Will the Minister advise us whether her
Department has now considered the form of the statement or whether that
will follow?
My probing amendment provides for
retaining the use of the statutory declaration. Our concern here is
related to impersonation and the growing problem of identity theft.
There is a growing problem of forms 288 being sent in by crooked
individuals to change the directors of registered companies. They may
do that in their own name or under a pseudonym or, often, the name of a
dead individual. These so-called directors then change the registered
office to one of their own choice so that the company has therefore
been hijacked to some extent, and typically they enter into contracts
using the false details.
The safest stage of the
registration process at the moment is the company formation stage. That
is because at that moment one has to go in front of a solicitor or
possibly a commissioner for oaths and make a statutory declaration.
Will the safety that we have within the system now disappear? I assume
that it will. How do the Government intend to make sure that we retain
this element of safety without the statutory declaration, not least in
view of the additional risks of accepting details online? This is a
probing amendment, I hasten to add. I am generally in favour of
e-commerce and using the internet, but we need to appreciate that there
are security concerns here that they are being misused. This is not me
suggesting that a problem will happen; it is a growing problem and we
need to have a remedy in place by the time the Bill comes into
force.
Margaret
Hodge: The hon. Gentleman rightly said that the statutory
declaration and the electronic statement will be replaced by this new
statement of compliance. He asked me whether the form of the statement
had yet been published. It is not yet published; it will be for the
registrar’s rules, although he will understand that the rules
will not require the presence of the solicitor or a commissioner of
oaths. They are likely to allow greater flexibility as to the persons
who are able to make the statement on behalf of the company: for
example, we could have such professionals as accountants making such a
statement on behalf of the company.
Mr.
Djanogly: I may have missed something here. Is the
Minister saying that someone will still have to give some kind of
compliance statement on the form, even though it does not take the form
of a statutory
declaration?
The hon. Gentleman then raised
the issue of fraud. Clearly it is a problem that we all constantly have
to grapple with, but I am not convinced that the hon.
Gentleman’s answer will really help. The registrar’s
rules will enable provision to be made for authentication, and we may,
for example, be moving towards a unique identifier. Breaches will
continue to be a serious matter, but there are various clauses in the
Bill to deal with the issue. Making a false statutory declaration would
be a matter for the law of perjury, while making a false electronic
statement would be an offence. Under clause 764, a false statement of
compliance will become a false statement, and the clause sets out the
penalties on conviction, including fines and custodial sentences.
Although the hon.
Gentleman is right to allude to a problem, therefore, I am not sure that
the answer lies in maintaining the statutory
declaration. Mr.
Shailesh Vara (North-West Cambridgeshire) (Con): Although
the Minister is right to say that there are penalties for those who use
a wrong identity, would she none the less agree that the idea in
effecting the relevant clauses is not to punish people but to prevent
the offences from being committed in the first place? That is where our
argument is coming from: we want to avoid the offences, rather than to
prosecute later on.
Margaret
Hodge: Clearly, prevention is the better route, and we all
want to go down it. As has been said, we hope that the existence of the
penalties will become a disincentive to breaking the rules. I am simply
not convinced that we shall be better able to prevent fraud if we have
a witnessed statutory declaration. That was all I was saying, although
I entirely accept that we would rather prevent fraud, and we need
constantly to look at the development of electronic communication to
see how we can improve facilities for doing so. The issue regularly
comes across my desk in relation to other parts of my
portfolio.
Mr.
Djanogly: I am a little confused. As I understand it,
there will be a declaration from someone else, rather than a statutory
declaration. Presumably, there will be a wider pool of people who can
give a declaration, so the process will become easier, and there will
be less red tape. Conceptually, that is fine, but if the idea is also
to move online, will the Minister explain how that ties in with
someone—albeit someone else—giving a declaration? Will
the fact that it has been given be declared
online?
Margaret
Hodge: I think that the answer is yes. What I was trying
to say was that the current developments in electronic communication
support improvements to ensure that the statement is not given
fraudulently or by an impostor. I am also told that, currently,
somebody can give a statement online that what someone else has
declared online is already the position, and we are not changing
that. It might help
the hon. Gentleman if I say two things. First, we are trying to widen
the range of people who can give the statutory declaration. Secondly,
two declarations have to be made at present. One is made by the first
director, or secretary, of a company or by a solicitor engaged on the
formation of a company, and it must be made or witnessed before a
solicitor or commissioner of oaths. In other words, it cannot simply be
made by the person or persons forming the company, and the statutory
declaration cannot, seemingly, be made electronically. That is why the
current Act explicitly provides for an electronic statement as an
alternative. Currently, there are two different sets of requirements,
which depend on the form of communication that is adopted.
Under clause 721 in part 29,
which relates to the registrar of companies, it will be for the
registrar to determine the form of the new statement of compliance and
issues such as who can authenticate it. Such matters may be set out in
the registrar’s rules
under clause 770. In other words, the details will, for the most part,
be matters for rules established by the registrar of
companies. I think I
have covered most of the points raised, and I hope that I have given
sufficient assurances for the hon. Gentleman to feel able to withdraw
his amendment.
Mr.
Djanogly: I thank my hon. Friend the Member for North-West
Cambridgeshire (Mr. Vara) for pointing out that prevention is as
important as penalties, if not more so. That is a central theme of the
clauses dealing with the filing of documents. I have no doubt that the
mechanics of the use of electronic filing will make the area more risky
and more open to abuse, so the chance of fraud will be increased. The
right hon. Lady said that a person can currently file online. I think
that that is true, but in practice it probably applies to a small
number of company formation agents. I have the feeling that the
proposals are intended to broaden the use of electronic filing. That is
not necessarily a wrong thing to do, but it will increase the risk of
abuse.
Jim
Cousins (Newcastle upon Tyne, Central) (Lab): Can the hon.
Gentleman tell the Committee whether the abuses to which he is drawing
our attention are widespread, excepting, of course, that he anticipates
they will become even more widespread in a purely electronic
situation?
Mr.
Djanogly: My understanding is that the hijacking of
companies, as I described it earlier, is becoming increasingly
widespread. I do not have statistics. The Minister might have them, and
if she does, I shall be grateful to hear them. It is increasingly
common and very simple to do. All that one has to do is to go to
Ryman’s get a couple of 288s— [Interruption.] I
take the Whip’s point that I should not, perhaps, explain too
clearly what to do. However, it is a simple
procedure.
Jim
Cousins: I am grateful to the hon. Gentleman for that
clarification, and no doubt we can look into the matter. I was not
seeking an instruction manual.
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