Economic Crime and Corporate Transparency Bill

Lord Vaux of Harrowden Excerpts

3rd reading
Tuesday 4th July 2023 Lords Chamber

[Lord Johnson of Lainston (Con)]

My Lords, I will now speak briefly to the government amendments, which deliver on the undertakings I made on Report, first in response to concerns raised about the robustness of the people with significant control—PSC—framework and secondly to close a gap in the register of overseas entities information requirements. I thank the noble Lord, Lord Vaux of Harrowden, in particular, for raising these issues. I also welcome the contributions of my noble friend Lord Agnew of Oulton and of the noble Lords, Lord Fox, Lord Ponsonby of Shulbrede, Lord Cromwell and Lord Clement-Jones.

The majority of the amendments fall into the former category of the PSC framework. I reassure noble Lords that, although the number of amendments is higher than we might have liked to table at Third Reading, the majority are minor consequential or tidying-up amendments, and a lot of the new material is in fact a refashioning of existing rules to make them work in the new context of a central register, rather than locally held PSC registers. These amendments improve this by requiring companies to collect additional and more useful information, and by improving the mechanisms through which companies collect the information and report it to Companies House.

Currently, companies must record various “additional matters” in the PSC register. The Bill as drafted removed the regulation-making power through which these additional matters are prescribed. Amendments 26 and 32 preserve those requirements in the context of a centrally held PSC register. Amendment 26 means that a company will notify the registrar if the company knows, or has cause to believe, that a person has become a PSC but the company has not yet had confirmation from them. Amendment 32 means that a company must give notice to the registrar if it knows or has cause to believe that the company has no PSC. This will provide a hook for the registrar to query the statement that a company has no PSC, if she has intelligence to suggest otherwise.

The Bill as drafted removed an important measure to ensure that personal information is protected appropriately. Amendments 14, 17, 20, 22 and 25 ensure that protection mechanisms remain in place, otherwise a person who is at serious risk of violence or intimidation could be reported as a PSC without ever knowing, meaning that they may not have had the opportunity to apply for their personal information not to be displayed publicly.

To improve accuracy and transparency, and to make it easier to monitor and prosecute non-compliance, Amendment 1 requires a company that is exempt from the PSC requirements to explain why it is exempt in each confirmation statement. Amendment 15 improves existing provisions of the Companies Act 2006 which require companies to investigate and obtain information about their PSCs.

Amendments 33 and 34 widen the scope of a regulation- making power in the Bill so that the power can amend relevant parts of the Companies Act 2006 and to make consequential amendments to other parts of the Act. This is to ensure that the legislation is coherent, by avoiding having similar provisions spread across primary and secondary legislation.

Amendment 39 creates a reasonable excuse defence relating to the offence of failing to comply with information notices. This aligns the drafting of the offences with other similar offences.

All other amendments are consequential. I hope that noble Lords will support these amendments.

I turn to Amendment 9. On Report, the noble Lord, Lord Vaux of Harrowden, tabled an amendment seeking to close a gap in the register of overseas entities’ information requirements relating to overseas entities acting as nominees. The Government agreed that this gap exists, and I thank the noble Lord and Transparency International for bringing it to our attention. The amendment tabled by the noble Lord was not quite right, but I hope that this amendment addresses his concerns. It amends Schedule 1 to the Economic Crime Transparency and Enforcement Act 2022 to ensure that, where there is a nominee relationship, this is declared. It then inserts a new definition of beneficial ownership into Schedule 2 to the 2022 Act: “registrable beneficial owners”. I hope that noble Lords will welcome this amendment and agree that it closes the gap that we discussed on Report. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I thank the Minister for these amendments. As he said, I described at Report the loophole in the register of overseas entities that allows people to hide the true ownership of UK properties through nominee arrangements. As the Minister described, he tabled Amendment 9, as he undertook to do, which effectively closes that loophole. I am not sure what conclusion to take from the fact that my original 11-line amendment has turned into one that runs to three pages—it presumably says something about my amendment drafting skills—but I am most grateful.

The other amendments that the Minister tabled relate to the register of persons with significant control. These new amendments tighten the rules and will improve the ability to identify PSCs. In particular, I welcome the requirement for the information to be filed on a centrally held register, rather than locally held registers managed by the companies themselves. The requirement to explain why a company is exempt from the PSC requirements is also an important improvement.

I was slightly confused as to what happens if a company has become aware that it has a PSC but the PSC has not yet confirmed their status or information. Amendment 20 appears to deal with that situation; it requires the company to notify the registrar if it knows, or has cause to believe, that a person has become a registrable person but has not yet had confirmation. However, that seems to conflict with the explanatory statement to Amendment 17:

“This means that a company will only need to notify the registrar of a person with significant control if the person has confirmed their status and information about them”.


Amendment 20 says that the registrar must be notified of an unconfirmed PSC but Amendment 17, or at least the explanatory statement to it, seems to say exactly the opposite. Can the Minister please explain which is right and how the two work together? More importantly, can he reassure me that a PSC will not be able to avoid being notified to the registrar simply by failing to confirm their status or information.

I put on record that, while I welcome and support the amendments, I do not believe that they deal with the problem of nominee shareholders not having to declare themselves as such. The new amendments are not an alternative to the amendment that the House passed on Report that required shareholders to state whether or not they are acting as a nominee, and if so who for. I hope that the Government will continue to consider that amendment and look at it favourably in the other place, or at the very least meet with me and others to see whether we can find a workable compromise. It should not be possible for bad actors to hide behind nominees, and there should be consequences for those who act as nominees to conceal such bad actors.

I am extremely grateful to the Minister and his officials for their helpful and constructive engagement throughout this process; they have been extremely generous with their time. In particular, I thank them for having addressed a number of issues, including the one we have just talked about, throughout the progress of the Bill. The level of engagement from all Ministers involved has been exemplary—if only all Bills were managed so constructively. I also thank all noble Lords who have been so generous in their support of the various amendments that I have proposed. When the Bill started in this House, it was generally seen to be a good Bill, and I think that it emerges from this House in even better shape.

[Lord Fox (LD)]

My Lords, there are times when your Lordships’ House is confronted with so many Third Reading amendments that it can be somewhat irksome, but this is not one of those occasions. This is a useful and helpful response from the Minister and his team to the debate we had on Report, and for that I thank them.

I reinforce the point made by the noble Lord, Lord Vaux, that these amendments do not replace those that we passed on Report, which I similarly hope the Minister and his team will continue to consider as we go forward.

Transparency of ownership and the registration of overseas entities are important to this. The point we have made on a number of occasions about keeping the whole Bill under review and looking at how it works once it becomes an Act will be vital. It is clear that we cannot second-guess all the reactions we will get out there, so having the fluidity and agility to deal with that will be important.

Although it is slightly confusing, I will offer my thanks and congratulations at this point, so that I do not do so twice. First, I congratulate the Ministers on getting legislative consent so smoothly. For many of the Bills that I have been working on of late, legislative consent never seems to come. However, unlike many of those Bills, this is one where all the House agreed on its objectives, so all we were discussing were the ways in which we could achieve those objectives. In that regard, I thank the Ministers for the great amount of time and effort they have devoted to listening to, and having meetings with, Members across your Lordships’ House and for seeking ways of accommodating our helpful suggestions. Particular thanks are due to the noble Lords, Lord Johnson and Lord Sharpe, and the noble and learned Lord, Lord Bellamy, as well as the noble Lord, Lord Goldsmith, and the noble Earl, Lord Minto, who made appearances in Grand Committee.

Similarly, the whole Bill team, and organisations such as Companies House, have given up a lot of their time to speak with us, so thanks should be given to them. There have been many contributions from the Cross Benches and the Benches opposite. I will not single out anyone for praise, except to say that it has been a great pleasure working with everyone on the Bill; I felt that we were all pulling in the same direction.

I also thank the noble Lord, Lord Ponsonby, and the noble Baroness, Lady Blake, for their camaraderie on the Bill. I thank my noble friends Lady Bowles, Lady Kramer, Lord Clement-Jones, Lord Wallace of Saltaire, Lord Thomas of Gresford and Lord Oates on our Benches. Finally, thanks go to Sarah Pughe in our Whips Office, who has kept us all in order.