Mr.
Djanogly: Possibly. That sentence continues by referring
to “intervention from the
Office of the Information Commissioner. Both a full and edited
electoral register were established. The full register was created from
the annual canvass and is updated monthly on the basis of a rolling
register. The edited register is made up of the records of those
individuals who have not opted out of their data being used for any
purpose. Restrictions
on the supply and use of the full electoral register resulted in only
credit reference agencies engaged in the business of providing credit
reference services being authorised to purchase the full register. In
turn use of that register was restricted to:
Vetting applications for credit
or applications that can result in the giving of credit or the giving
of any guarantee, indemnity or assurance in relation to the giving of
credit: Meeting any
obligations contained in the Money Laundering Regulations
1993...or any rules made pursuant to section 146 of the Financial
Services and Markets Act 2000(c); and Statistical analysis of credit
risk assessment in a case where no person whose details are included in
the full register is referred to by name or necessary
implication. There
are three major CRAs providing consumer information and five major CRAs
providing commercial information to lenders and, in the area of sole
traders and small and medium sized enterprises, there is considerable
overlap between consumer and commercial activity.
CRAs provide information to
lenders about businesses and those responsible for them. The
information that they provide is a combination of public and privately
shared data. Traditionally, this information has been provided to
enable lenders to make decisions about advancing credit, to confirm
identity for the prevention of fraud and money laundering, fraud
prevention and investigation and for debtor
tracing. One important
source of the information used is the directors’ data from
Companies House. This can be combined with other information to enable
lenders considering doing business with an organisation to check the
individuals responsible for its running. A key element of this check is
access to the home addresses of directors to verify and cross-check the
identity of an individual across different
databases. We are
concerned that the removal of the provision to permit the disclosure of
the protected register to CRAs is likely to have significant and
un-intended consequences for
lenders. Unscrupulous
and disqualified directors may be encouraged to abuse the restricted
register to avoid financial responsibilities, commit fraud, and obtain
access to goods and services that would normally not be granted and to
create fictitious identities. In turn lenders and other commercial
organisations will face heightened risk and will become reluctant to do
business with companies or individuals with whom they are unfamiliar
unless further checks can be undertaken. New start-ups and particularly
small and medium enterprises (SMEs) to whom our members provide finance
are likely to find access to credit restricted as a result, all of
which will serve to restrict growth and competition. Failed and
disqualified directors will be able to conceal and disregard existing
liabilities and bad debt and resume trading to the detriment of other
businesses and the finance
sector. In order to
mitigate these consequences it is important that the new public
register of directors’ addresses specifies whether the disclosed
address is a director’s home or service address. The protected
register of directors’ home addresses must continue to be made
available, in full, to certain authorised organisations for certain
specific and limited purposes on condition that they use the
information in specified ways for particular purposes only. This will
safeguard lenders’ access to the information they need when
assessing whether to advance a loan and in helping applicant
identification. CRAs
have ensured that robust systems exist to manage access to the data
contained within the electoral register and ensure that it is only
supplied and used in accordance with the regulations. The recently
published Electoral Administration Act 2005 empowers individuals deemed
to be at risk to apply for anonymous registration in order to prevent
their personal information from being published on the public
register.” I shall return
to that point. The FLA
continues: “The
Department for Constitutional Affairs has also consulted with CRAs to
ensure that access to personal data is maintained in a way that
safeguards the identity of the individual while promoting financial
inclusion. We
therefore strongly believe that the provisions of the Bill as drafted
provide a practical and sensible set of arrangements providing for the
continued functioning of the market whilst also putting in place the
necessary safeguards to prevent
abuse.” That is
a well-considered letter and it deserves to be mentioned. The
Government will get about half way to providing what the FLA wants, but
will the Minister discuss its concerns generally? It would be good to
have that on the
record. Whether the
provisions will work is yet to be seen, although we think that they
will help. However, various issues need to be addressed now to tighten
up their effectiveness. One is the need to enable directors to remove
prior notifications of their home address; otherwise, the proposals
will be useless if a director moves home. In the Lords, the Government
resisted
our proposal on that on the basis that the costs were too great. I found
out through tabling a written question that it costs about £40 a
go. Ministers also
said that as people can access details on the internet in any event, we
should not bother to deal with the issue now. We disagreed with that
position and were pleased that the Government seemed to have changed
their mind in the final stages of consideration in the
Lords. This is part of
a letter sent to me by Lord Sainsbury, who
wrote: “As
regards historic information, the Bill—as
amended—provides power for regulations to specify circumstances
under which addresses can be removed from the public record held by
Companies House. We intend to consult over draft regulations later this
year so that they can be brought into force at the same time as the
provisions providing protection for all directors’ home
addresses.” That is all
well and good, but we do not understand why it cannot be done now in
the Bill. We agree that if there is a cost, it should be borne by the
director concerned. Furthermore, we will later move amendments Nos. 258
and 279 to clause 225(2)(b). That clause interacts with clause 741,
which aims to ensure that when it is considered appropriate for old
Companies House records to be removed, the registrar must do
so. There is a further
issue of wider access to directors’ home addresses via the
internet, which was discussed in the Lords. Gone are the days when we
just threw up our hands and said, “That’s on the web, so
there’s nothing to be done about it.” It is clear that
the vast majority of directors’ addresses on the web are
accessed via the electoral register, and we must deal with
that. In a letter of 9
May to Lord Sainsbury, I
said: “I am
aware that Clause 10 of the Electoral Administration Bill, currently
going through
Parliament”— that
is what the FLA picked up
on— “would allow
for an elector to apply to be registered anonymously. Please could you
confirm that this provision could be used by individuals to ask town
halls to remove their details from the public
register. Has your
department assessed how useful these provisions would be to deal with
the problems set out in this letter, e.g. as regards the level of proof
of violence that would need to be given to the
council?” Lord
Sainsbury, replying on 8 June,
said: “You
asked about directors’ addresses on the electoral register.
Anonymity is to be granted to those whose safety would be at risk if
their name or address were to appear in the electoral register. The
Department for Constitutional Affairs advises that decisions have not
yet been taken on the evidence that will be required for a person to be
granted anonymous registration, but the key will be in meeting the
‘safety test’ as set out in clause 10 of the Electoral
Administration Bill. This test is satisfied if the safety of the
applicant for an anonymous entry or that of another person of the same
household would be at risk if the register contains the name of the
applicant or his qualifying
address.” I am
not totally convinced that the Government have yet given the issue the
attention required or that they have considered closely enough the
provisions of the Electoral Administration Bill in terms of protecting
company directors in the context of this
Bill.
When do the Government expect
decisions to be taken on the evidence that will be required for a
person to be granted anonymous registration and what will the threshold
be? The Minister might have to come back to me on that
matter. The issue is a
major concern for many embattled company directors. It is a serious
issue for the stability of British business and the welfare of many
directors and their families. I hope that the Government listen to
their great need and come back to us on the matter.
I acknowledge the efforts of
Lord Sainsbury, one of the few members of the Government who has
consistently been brave enough to stand up for directors and
shareholders who have been terrorised and who has paid attention in the
past five years to the Opposition’s calls for protection for
company directors and
shareholders. We
recognise that the Bill has been greatly improved by various amendments
made in the other place, but it is not quite there
yet.
Margaret
Hodge: That was a long speech on clause stand part. I want
to return to the amendments. I thank the hon. Gentleman for picking up
an incorrect cross-reference, and we are therefore happy to accept
amendment No. 270. On
amendment No. 459, the hon. Gentleman makes a good case for companies
having the option of keeping their registers of directors wherever
their register of members is kept available for inspection, although he
will agree that it must be in the same jurisdiction as the registered
office and that it must be notified to the Registrar of
Companies. Any
relaxation that the hon. Gentleman suggests should equally apply to
matters such as plc registers of secretaries and to registers of
authorised signatories for those companies required to keep them. The
requirement should not be considered in isolation; there is also a
right for members to inspect records of resolutions and meetings under
clause 341. There is a right for members to inspect directors’
service contracts and qualifying third-party indemnity provision under
clauses 213 and 220. There is a right for members and creditors to
inspect instruments creating charges and a public right to inspect
registers of charges under part XII of the 1985 Act, which is to be
restated. The
possible places for the inspection of the various records and registers
vary. We must minimise the likelihood of records being sent all over the place, possibly discouraging inspection by those who want to exercise that right. 1.45
pm
Mr.
Djanogly: The Minister has just hit on the point. The
procedure can be used to discourage inspections by having people go to
different parts of the country to see different
registers.
Margaret
Hodge: The hon. Gentleman and the Law Society have made a
sensible proposition. All that I would say to him is that we need some
time and would like to table an amendment on Report that gives
companies the option of keeping their register of directors either at
the principal place of business or at
the same place as their registers of members, but we want to include
conditions that protect those who wish to inspect registers and other
records and registers available. I hope on that basis that the hon.
Gentleman will withdraw his amendment.
Amendment No. 367 appears to be
deregulatory, relieving the company of the obligation to enter an
alternate director’s particulars on the public record if his or
her appointment is of minimal duration, but I am sure the hon.
Gentleman would accept that there could be a serious problem with such
an exemption. However long or short a time someone is appointed for,
they have duties as a director for the period when they act as such.
That is the current law, which the Bill retains. Under the amendment
some appointments would become invisible. On that basis, it would be
better not to accept it. I accept that bureaucracy is involved in
complying with the 100 per cent. record, and if we can think of a
better way of reducing the bureaucracy but maintaining the record we
should adopt it. We will certainly consider that, but at present for
completeness and consistency, we need to reject amendment No.
236. I shall now speak
to the Government amendments. On introduction in another place the Bill
provided for a system whereby any director could apply to have his or
her home address on the protected record. It was argued that that would
leave many directors exposed, and we were persuaded that it would be
better if all directors were to provide both a service address for the
public record and their home address for the protected record. We
tabled amendments based on a scheme suggested to us by the Association
of the British Pharmaceutical Industry, which we will consider later
when we reach chapter 8 of this part.
To keep things as simple as
possible for companies and their directors, the Bill permits both that
the service address be given as the company’s registered
address, and that the home address be noted as being the same as the
service address. That means that it would be possible for the record of
a director’s residential address held at Companies House to be
changed automatically if the company were to change its registered
office, whether or not the director had in fact moved.
Furthermore, as the record of
the residential address is not public, such errors would not come to
light until an enforcement agency, for example, needed to use it. That
would probably be a common problem, for as we all know, many companies
on start-up have their registered homes at a director’s home but
latergrow out of that arrangement. The Government amendments
address that problem while still keeping things as simple as possible
for both companies and directors. Amendment No. 365 provides that a
director’s residential address may be stated to be the same as
his or her service address only if the service address is not the
company’s registered office.
Amendment No. 366 requires that
with any notification of a change in the director’s service
address there must also be either an accompanying notification of a
change in the residential address or a statement that there is no
change.
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