Debates between Lord Johnson of Lainston and Lord Leigh of Hurley during the 2019-2024 Parliament

Economic Crime and Corporate Transparency Bill

Debate between Lord Johnson of Lainston and Lord Leigh of Hurley
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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My Lords, government Amendment 20 will give the Secretary of State the ability to make regulations to specify what aspects of the profit and loss account delivered by companies that qualify as micro-entities or small companies might be withheld from public inspection. Such regulations would also set out the parameters and circumstances in which the information may be withheld.

Currently, Section 468 of the Companies Act gives us the power to specify the form and content of the profit and loss account that is to be delivered to Companies House. However, it does not provide us with the power to collect information and then withhold it from public inspection. Making the profit and loss accounts of micro-entities and other small companies available to the public benefits users of the register, such as credit agencies. It is a highly valuable data source and would aid the detection of economic crime.

We are of the firm belief that the Bill’s provisions requiring such accounts to be delivered to Companies House are important additions to transparency requirements. We know that the minimal requirements that currently exist make incorporating as a micro-entity, or as another small company, open to abuse by those who wish to present a false picture of a company’s financial position. However, I am mindful of the concerns raised by some noble Lords and stakeholders about the potentially negative impacts on privacy and competition for small business owners; they point to the risk that increased transparency might lay SMEs open to unwelcome commercial pressures.

We have also received some correspondence from small business owners who are concerned that publishing accounts will, in effect, reveal their personal salary. For example, the director of a small accountancy company from London wrote to us to complain that publishing their profit and loss account would let their neighbours and competitors know what they earn. The owners of a small company from Shoreham-by-Sea have written to us to express their discomfort with their earnings being viewed by clients and subcontractors, who might seek to gain commercial advantage with the information. The Federation of Small Businesses today tweeted:

“Requirements to declare profits and losses would leave small firms open to a high level of risk. … Commercially sensitive information could be used against them by competitors and suppliers”.


To recap, we are not looking not to collect this information; we are looking to ensure that there is a full review in terms of what level of information we publish.

Following Royal Assent to the Bill, and prior to exercising this power, the Government will consult further with business groups, credit lenders, the accountancy sector, enforcement agencies and others to understand what, if any, information should be withheld from the public register. The amendment therefore gives the right level of flexibility to enable the Government to formulate a balanced approach between the information required to be included on the public register and the privacy of small businesses. I beg to move.

Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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My Lords, we have discussed this concept of disclosure at earlier stages. Of course, if a person does not want anything disclosed, they could become a sole trader or a limited liability partnership or a partnership, in which case very little, if anything, needs to be disclosed. My question and concern is just to understand the approach that government will take to this. Is it the intention just to give a blanket exemption for, perhaps, companies in defence or companies with complicated IP or companies in sensitive sectors? Is it to respond to those who make the request generally in the affirmative or to ask further questions to determine why a company should be exempted from disclosure? If a company simply asks to be exempted because it does not want its competitors to know, will that open the floodgate to everybody to do the same? I am not sure that “because we don’t want our competitors to know” is a particularly good reason, to be honest. I am therefore a little nervous about this clause, particularly because it is a bit vague. It just talks about regulations, and Section 1292 of the Companies Act 2006 is just an empowering section on regulations. We are opening the door very wide, and I hope that the Minister, in due course, will be able to give us some very clear guidance on what the Government have in mind.

Economic Crime and Corporate Transparency Bill

Debate between Lord Johnson of Lainston and Lord Leigh of Hurley
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I thank my noble friend and guru Lord Leigh for his Amendment 73AA, and the noble Lords, Lord Fox and Lord Ponsonby, for their contributions. I assure my noble friend that this amendment is not necessary. The Government hear his comments loud and clear but, as with all outings at this Dispatch Box as a Minister, I am unable to give the purity of the answer that we might all prefer to hear.

However, I will say that the Government are taking forward reforms to audit and corporate governance regulation separately following the publication last year of our response to the White Paper consultation on restoring trust in audit and corporate governance. The White Paper considered the information that must be provided to Companies House when an auditor leaves office, so this covers the point about the auditor leaving office rather than necessarily the appointment of a new one; that is a core point that has been raised and heard. The Institute of Chartered Accountants in England and Wales—many noble Lords in this Room have declared an interest as being a member of that august body so they will know this already, although I am not—has raised with my officials the lack of up-to-date information on the Companies House register about the appointment of new auditors.

The Government are therefore already considering how the public record might be improved in respect of appointments of auditors, including possibly via a combination of notifying the appointment when it is made, as well as updating the register if needed as part of the annual confirmation statement. We covered the point about the auditor stepping down or leaving office. This could work in much the same way that it does for the identities of company directors, which I believe will satisfy this Committee. There are already secondary legislative powers in the Companies Act 2006 on the content of the confirmation statement, and amendments to this framework are already being considered as part of the implementation of the Government’s White Paper proposals on restoring trust in audit and corporate governance.

I hope that satisfies the Committee and I therefore ask my noble friend kindly to withdraw his amendment.

Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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I thank my noble friend. I am not surprised by his response, although one would have thought that a Bill on corporate transparency might stretch itself this far. In answer to what we might call the Vaux-Fox syndicate, when an auditor resigns, the company has to notify the Registrar of Companies of that within 14 days. I think it is a criminal offence not to do so, for both the company and the officer. That is pretty tight; it is just what is in the notice and making sure we are aware of what is going on thereafter. However, given the reassurances from my noble friend that the Government are beavering away day and night on the audit reform, I beg leave to withdraw my amendment.

Economic Crime and Corporate Transparency Bill

Debate between Lord Johnson of Lainston and Lord Leigh of Hurley
Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I am grateful to the noble Baroness for her intervention. In discussions about the Bill, that philosophy has been raised. I may have mentioned on our previous day in Committee—I certainly mentioned it in private—that, given the very large number of companies registered in this country, one has to ask whether they are all necessary for the function that they purport to perform. Many individuals may be better off as sole traders or in other forms of partnership that do not need to go through these registration processes.

I am also aware of the privileges that limited liability offers, as a result of which there is a fair exchange in terms of the amount of information to be released. I absolutely agree with these principles that we have discussed. However, in this specific instance, it is absolutely right to have a thorough and deep consultation to make sure that through our actions we are not prohibiting people from running legitimate businesses and at the same time compromising their personal privacy or security. That is a sensible debate to have. The point, which is not necessarily specific to this amendment, is about the information that we collect. The Government are absolutely committed to ensuring that we collect the right amount of information so that we can increase fundamental corporate transparency and reduce abuse of the system.

Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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I thank my noble friend for his reply and repetition of some of the remarks he was kind enough to make at our last meeting. He has prompted me to remind the Committee, for the record, of my commercial interests, as noted on the register, which include directorships and shareholdings of micro-entities. I will read Clause 73 again more carefully, and we might return to this on Report if I am not satisfied with that explanation.

On the micro-entity point, the noble Lord, Lord Ponsonby, is right. Those bands are correct, but it is two out of three: one could have a small balance sheet and a small number of employees but a huge turnover and be under the net. I was going to make the same point as that raised by the noble Baroness, Lady Bowles of Berkhamsted: that is the bargain that a proprietor of a limited company makes with the public. You are protected by limited liability, but there must be disclosure. In fact, as I understand it, the information has to be prepared and disclosed to HMRC in pretty much the same format, so there is no extra burden in submitting it to Companies House. With that, I beg leave to withdraw my amendment.

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Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I am very grateful for the noble Lord’s intervention, as with all interventions today. The ACSPs are already supervised by the money laundering supervisory authority. Should there be a discussion over some type of more effective oversight of ACSPs, in the view of this Committee? We will no doubt discuss that in the future. But as it stands, they are regulated and if any noble Lord is involved with such a business—if they have a financial services business or have been involved in financial services—they will know the strength of the regulator and the fear in which decent, law-abiding firms hold their regulator when it comes to enacting the necessary practices to perform their duties and tasks.

The final amendment that I have in my notes is Amendment 52, tabled by the noble Lords, Lord Coaker and Lord Ponsonby, and the noble Baroness, Lady Blake. It would require a report on foreign ACSPs to be made one year after this Act is passed. I do not consider this amendment to be necessary, the main reason being that colleagues in the other place have already agreed to the addition of Clause 187, requiring the Secretary of State to prepare reports on the implementation and operation of Parts 1 to 3 of the Bill and to lay a copy of them before Parliament within six months of the Act being passed and every 12 months thereafter. Since authorised corporate service providers are provided for in Part 1, they should already be captured.

For the reasons given, therefore, I do not support these amendments. I ask the noble Lord, Lord Vaux, to withdraw Amendment 48.

Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Con)
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Captivated as I was by the Minister’s mellifluous tones, I am not quite clear if he is saying that he is prepared to write to us about proposals for SIC codes or to meet us or both. I totally accept that it is within the scope of the Bill and certainly within the scope of the purpose of the Bill, but it is an extra exercise, an extra burden. None the less, I wonder whether he feels it is something he could take on.

Lord Johnson of Lainston Portrait Lord Johnson of Lainston (Con)
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I am grateful to my noble friend for raising this point, and I hope I have not overpromised. Personally, I am very keen to make sure that every part of the Bill is discussed and I am very happy to ensure that the comments we have raised in this debate today are passed on to the right office, which in this case is the Office for National Statistics, which falls under the Treasury rather than the Department for Business and Trade. I am sure it will welcome involving itself in this discussion.

I would like to make a correction: the consultation on the money laundering oversight regime will begin in the summer, not conclude in the summer. I apologise for that.