Registered Office Address (Rectification of Register) Regulations 2024

Lord Leong Excerpts

Monday 19th February 2024 Grand Committee

[Lord Fox (LD)]

My Lords, as someone who has spent a lot of his professional life working on annual reports, I have often had questions about GAAP, but the Minister will be pleased to know that I will not ask them today.

The four SIs before us are to be welcomed. They are steps on the way from our discussions on both the last economic crime Bill and the one before that. We are moving forward, in a sense. I am glad that the noble Lord, Lord Vaux, introduced what I call the Knighton collection of companies that were registered to a terraced house in the Welsh borders, not far from where I live—as I believe does the noble Lord, Lord Bourne. I would like some reassurance that the statutory instrument on registered office addresses would deal with that.

As the noble Lord, Lord Vaux, eloquently set out, there are a lot of steps to go through to eliminate falsely registered companies. It comes back to the question of whether Companies House is capable of really handling this, ceasing to be a filing cabinet and starting to be an investigative organisation. To echo the point made by the noble Lord, Lord Vaux, it would be very helpful to have an update on how the huge cultural change that Companies House needs is going. Many of us were impressed by the team that we saw, but also a little frightened by the huge task that it has in front of it to make these SIs and the next 51—or however many there are—come to life.

I have some trepidation on the second of these SIs, on limited liability partnerships, because the noble Baroness, Lady McIntosh, seated opposite, is our Scottish legal expert. I wondered where Scottish partnerships come in, because the territorial extent of that statutory instrument is the whole UK. Where do Scottish partnerships sit within that?

The service address and principal office address regulations are useful and important too, but expose the central weakness that is still within our system. After all the work we did on the Bill, those with control still have the ability to hide that control. We welcome the Service Address (Rectification of Register) Regulations and the Principal Office Address (Rectification of Register) Regulations, but can the Minister set out, either now or in writing, how we are going to eliminate the cancer within this system of people obscuring the real ownership of assets to the authorities and wider society? With that, we welcome these four statutory instruments.

[Lord Leong (Lab)]

My Lords, I thank the Minister for setting out these regulations and everyone who has spoken in this short debate. I will take these instruments one at a time.

Under the current system, criminals can—often by using data unwittingly shared or stolen and for sale on the dark web—fraudulently register an individual residential address as a registered office with Companies House, without the knowledge of the actual residents. Since 2011 it has been possible for companies to be incorporated within 24 hours for as little as £12, with Companies House making no checks on the veracity of the address. Once this has been done, the perpetrators can apply for credit, business loans and other financial arrangements. This fraud often does not come to light until the individual wants to apply for credit and finds that they are unable to do so, often resulting in considerable problems.

This instrument relates to where individuals have had their residential address hijacked. It allows the registrar to change the address to a default address and to strike the company from the register of companies if a genuine new address is not provided. It establishes criminal offences for companies and officers where they do not comply. We welcome the streamlining of this process and expansion of the registrar’s powers that this instrument provides, including that, as well as acting on the basis of applications, the registrar can when necessary act unilaterally based on any information in their possession to move swiftly to change a company’s registered office address without giving notice in advance.

However, I would like to know how the Government seek to protect and support victims of these fraudulent practices, as mentioned earlier by the noble Lords, Lord Vaux and Lord Fox. Can the Minister say how they will be informed of developments? Will victims be supported if issues continue for them beyond the changing of the registered address—for example, if they have negative notes or ratings on their credit file? If so, how will this be addressed?

Given that this is clearly a widespread practice, does the Minister have any information about provisions to actively check business addresses? There could be existing situations in which fraudulent addresses are in use but currently unchanged or undetected; they may not come to light until the innocent victims have their lives blighted by the discovery of a fraudulent registration of which they were unaware, as in the case in Wales that was mentioned. Does the Minister have accurate figures for how many addresses are registered? Surely it must be in the millions. If, as I suspect, it is on that scale, what analysis has been done on whether this instrument will create an influx of work for the registrar? Has resource been allocated for this?

I move on to LLP. This instrument will ensure that the reforms to company law made by the Economic Crime and Corporate Transparency Act 2023 also apply to the law governing limited liability partnerships. It will ensure that company law applies without arbitrary differences between companies and LLPs. It pertains to straightforward administrative amendments relating to a company’s name, registered office and email addresses, its directors, annual confirmation of accuracy on the register, information about persons with significant control and so forth. We support this legislation, which seems both reasonable and straightforward, and so on this occasion I do not have any further questions for the Minister.

I move on to the Service Address (Rectification of Register) Regulations 2024. As many noble Lords will know from personal experience, directors and secretaries of companies and persons with significant control over companies are required to notify the companies registrar of their service address—that is, a location where documents may be deemed effectively served on that person.

This instrument empowers the registrar to change the registered service address to a default address nominated by the registrar where the registrar is satisfied that the registered service address does not meet the necessary legal requirements. The registrar may change the address by their own motion or on application and may also, at their discretion, change the address without notice or after a period for objections, the length of which may also be at the registrar’s discretion. Clearly, the situation in which company directors, secretaries and persons of significant interest could attempt to delay or evade being held to their legal responsibilities by providing non-compliant addresses would be unsatisfactory.