Registered Office Address (Rectification of Register) Regulations 2024

Lord Bourne of Aberystwyth Excerpts

Monday 19th February 2024 Grand Committee

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

My Lords, I beg to move that the Committee also consider the draft Limited Liability Partnerships (Application of Company Law) Regulations 2024, the draft Service Address (Rectification of Register) Regulations 2024 and the draft Principal Office Address (Rectification of Register) Regulations 2024, which were all laid before the House on 18 December 2023.

These regulations represent the first substantive tranche of a total of some 50 statutory instruments that will breathe life into the reforms being introduced by the Economic Crime and Corporate Transparency Act 2023, which I will refer to as “the Act”. It was my pleasure to help guide that Act through Parliament. I pay tribute to noble Lords for helping deliver a landmark piece of legislation; I am extremely pleased to see so many of them in their usual place today. The Act’s reforms will help bear down on the criminals, kleptocrats and terrorists who abuse our open economy, and will enhance the UK’s reputation as a place where legitimate business thrives.

I will begin by turning attention to the draft Limited Liability Partnerships (Application of Company Law) Regulations 2024. While the inevitable focus of the Act was on the reform of company and limited partnership frameworks, our policy is generally to apply company reforms to the class of entity established through the Limited Liability Partnerships Act 2000. That 2000 Act provides a regulation power to do so and, where appropriate, to modify the application to suit the limited liability partnership, or LLP, context. We intend to exercise the power through further instruments as necessary to ensure that Act provisions apply coherently as between companies and LLPs.

This instrument forms the first step in that process and serves to transpose the elements of the Act that commenced on Royal Assent in October 2023 and in January 2024 and, most significantly, those planned to commence on 4 March. I remind noble Lords that the intention is that many of these points will indeed commence on 4 March. That date is an important one, as it marks the point from which it is intended that many of the company registrar’s new powers will come into effect and from which significant new requirements will apply to companies and, by virtue of this instrument, also to LLPs.

Noble Lords will be pleased to know that I spoke this afternoon to the Registrar of Companies; I was very comforted by her encouraging words about how Companies House is ready for that date and looking forward to it. I am happy to cover further points later around its preparedness and the chronology of other activities feeding off the Act.

Those provisions include: establishment of additional controls around the name an entity chooses to register and that under which it conducts business; a statutory requirement to register an appropriate email address; an obligation annually to confirm that the entity acts with a lawful purpose; and, perhaps most importantly, the registrar’s new objectives under the Act to strive to ensure the integrity and accuracy of register information and, within the parameters of her functions, to prevent companies and others carrying out illegal activities. Elsewhere among those powers and requirements are those that relate to the addresses that corporate entities are required to file with the Registrar of Companies.

That brings me to the next instrument in this group, the Registered Office Address (Rectification of Register) Regulations 2024. Instances can arise in which an unsuspecting householder finds that a company with which they have no involvement has misappropriated their address, claiming it as that of the registered office they are required by law to file with the registrar. This not only causes alarm and inconvenience for householders but can be indicative of criminal intent on the part of the company in question.

Through the Act, we are strengthening the registrar’s powers to combat this practice by tightening the requirements around what constitutes an appropriate registered office address; streamlining and expanding upon existing avenues of redress for those impacted; introducing criminal sanctions for those who fail to take corrective action; and, ultimately, providing the registrar with the ability to strike from the register those companies that persist in offending.

The purpose of this supporting instrument is to establish a flexible framework within which the registrar can act to address this abuse. It puts flesh on the processes to be followed where the registrar believes it appropriate either to act unilaterally and expeditiously to change a company address or to provide it with the opportunity to object to a proposed change. It sets out how criminal penalties will apply to companies, and their officers, which fail to take corrective action where the registrar has replaced an erroneous office address with a default address. It also outlines the process the registrar can follow to strike a company off the register when corrective action is not taken.

These registered office address regulations apply these procedures and processes in the limited company context. The limited liability partnership regulations I introduced earlier serve to transpose them to apply with similar effect in the LLP setting.

I will now cover the Service Address (Rectification of Register) Regulations 2024 and the Principal Office Address (Rectification of Register) Regulations 2024. They are, so to speak, two further chapters in the same story. Just as companies are required to file particular address details, so are persons associated with them. It may be helpful if I set out in a little more detail what these requirements are and where they apply.

I turn first to service addresses. A service address must be filed in respect of all company directors, company secretaries and any individual registered as a person with significant control, or PSC.

I move on to principal office addresses. Certain companies have directors or company secretaries that are other corporate entities rather than individuals. Companies may also have what is termed a relevant legal entity, or RLE, which is a company or organisation that has a significant degree of influence or control over another. They are effectively the same as people with significant control but are entities, not individuals. A company must provide address details in respect of all three of these categories and, in doing so, has the option of filing either a registered office or a principal office address.

These two sets of regulations establish similar processes around the rectification of false or erroneous service and principal office addresses as the service address regulations referred to earlier. However, there is one material difference. Because these addresses relate to individuals or corporate entities other than the company itself, the ultimate sanction of striking the company at issue off the register for persistent non-compliance cannot apply.

All three sets of these address-related regulations are also applied in an LLP context by the draft Limited Liability Partnerships (Application of Company Law) Regulations 2024 that I presented at the outset. In combination, they will deliver a robust and comprehensive safeguard, encompassing, for example, instances in which an address is misappropriated for multiple abuses within the one company, as well as providing scope for much quicker redress for those who still fall victim. At present, the registrar can act only following an application from the victim, and she has to provide companies with 28 days in which they can challenge the claim that an address is being misused. These registrar powers are available only in respect of the registered address; they are not currently provided for service and principal addresses.

Once these improved mechanisms are in place, not only will the registrar also be able to change an address to a default address of her own volition but she will have the discretion to do so immediately, affording the company the opportunity to challenge only after the event. Therefore, in cases of prima facie abuse, it will be possible to deliver much quicker and more efficient resolution. I know that noble Lords on all sides of the House were particularly focused on that topic during the passage of the Act.

In conclusion, these measures are all crucial to the Act’s effective implementation. I hope that noble Lords will support them and their objectives. I beg to move.

[Lord Bourne of Aberystwyth (Con)]

My Lords, I thank the Minister for setting out clearly and crisply the details of the four sets of regulations. I declare my interests as set out in the register. It is certainly not my aim to do otherwise than to support these regulations, which are consequential from the Economic Crime and Corporate Transparency Act 2023, as the Minister explained, but I want to raise some brief points in relation to them.

I appreciate that, in relation to the address of a company’s registered office, one major concern is companies opting for PO box addresses or inappropriate addresses that are not the address of the company or any of its officers. I take the point about the importance of tackling this, particularly in relation to crimes of fraud, money laundering and so on. Does the Minister have any idea of the incidence of this type of misleading activity? If he does not have the figures to hand, I would be grateful if he could write to me.

I have two brief additional points. More widely, I wonder if the Minister can provide any details—he has given some indication—of when other provisions of the Economic Crime and Corporate Transparency Act 2023 will be brought into force. I appreciate what he said about 4 March but I wonder whether Section 60 of that Act, on confirmation of lawful purpose, is to be brought in on that date. I think it is but would be grateful for an identification in the regulations and any other regulations expected in that regard. It would be good to have that mapped out.

Lastly, is the Minister in a position to say something about a review of company law more widely? The last far-reaching review of company law took place in 2006. It was then the most far-reaching review we have ever had and led to the longest piece of legislation on any subject ever seen at Westminster, so it would be quite a task, but that was some 20 years ago and it is in need of some review and refresh. When the Minister responds, perhaps he can give some indication of when that might be tackled. I am most grateful.

[Lord Vaux of Harrowden (CB)]

My Lords, it was good to hear that Companies House is making such good progress. I wonder if it might make sense for the Minister to arrange an update session at some point with Companies House for interested Peers, as we had during the process of the Economic Crime and Corporate Transparency Act.

I will speak briefly on the three rectification of register SIs. I greatly welcome these regulations. They will enable people whose address is being used without their permission as the registered or service address, or principal office, of a company to have that remedied. We heard during the passage of the Economic Crime and Corporate Transparency Act of the case of the unfortunate individual in Wales whose address had been fraudulently used to register 12,000 companies, and how hard it was for him to have that corrected. It must be deeply stressful for such an innocent party to worry about whether they will find themselves being chased by HMRC for unpaid VAT or tax, or indeed by other creditors, and possibly even finding the bailiffs at their door chasing payment for debts of companies that are nothing to do with them. Until now, they were getting little or no help from Companies House or HMRC in that situation, so it is good that action is being taken but I have a few questions to ask.

First, when Companies House decides to change the company address to the default address, it must in most cases give written notice to the company. I am curious how that will work in practice if the original address was fraudulent, or even just an error. The Committee will be able to see a bit of a circularity there. It presumably just means that the innocent party receives yet more mail addressed to a company that he knows nothing about, which might add to his stress. If it was a genuine mistake, the company might never find out until it was struck off, so there is a practical issue there.

More importantly, though, the regulations relate only to the single company in question. As we know, when a false address is used many companies—in the case of the man in Wales, thousands of them—may often be registered at the same address. It would surely make sense to include a duty on the registrar to investigate all other companies registered at the same address when the decision is taken to change the address to the default; otherwise, the innocent party whose home is being fraudulently used will have to make an individual application in respect of every company of which he becomes aware. In the case of the Welsh gentleman, that would be 12,000 individual applications, which would be an enormous and rather unfair burden on an innocent person. Can the Minister confirm that the registrar will investigate all companies registered at the same address, even if that is not an actual requirement under these regulations?

Related to that, the regulations are not clear about how an application for an address to be changed can be made. Does it have to be in writing or will Companies House make available a more user-friendly system—online, email or whatever—to minimise the effort that an innocent party has to make to sort out the matter? In most cases, I imagine that a fraudulent company will use the same address for the registered office, service address and principal place of business as relevant. Under these three SIs, the innocent party will in that case have to make three separate applications for each such company—or indeed more than three if for each individual director. That 12,000 could then turn into 36,000 or more applications to sort out the issue for our man in Wales. Can the Minister explain to me how this will be streamlined to minimise the burden on the innocent parties?

As I mentioned, such fraudulent companies are often used for the purpose of VAT fraud. Would it not make sense, therefore, also to include an obligation on the registrar to inform HMRC every time such a situation is found? During its evidence sessions, the Fraud Act 2006 and Digital Fraud Committee heard how it is common for fraud victims to check Companies House as a sensible due diligence step before parting with their money. If a company has been moved to a default address, would it not make sense to highlight that on the register and flag the company as being a fraud risk, during the period before it is struck off, to protect potential fraud victims?

Overall, these regulations are a good, important step but they could usefully be added to in order to provide better, simpler remedies for the innocent parties in these cases.