Economic Crime and Corporate Transparency Bill (Tenth sitting)

Seema Malhotra Excerpts

Committee stage
Tuesday 8th November 2022 Public Bill Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

It is a pleasure to speak with you in the Chair, Ms Elliott. Clause 80 gives the registrar of companies a new power to require information. The registrar’s existing powers are insufficient to tackle the large volume of inaccurate or suspicious information on the register. She has no powers to compel filers to furnish her with information to assist her to investigate filings that she is concerned are inaccurate or fraudulent, and that she may wish to remove. That means that suspect information is often accepted on to the companies register, damaging its accuracy, reliability and usefulness.

The insertion of proposed new section 1092A into the Companies Act 2006 will give the registrar a power to require that a person provide her with information for certain purposes. Those are: determining whether someone has complied with a delivery obligation or requirement; determining whether a document delivered to her satisfies the proper delivery requirements, including whether it contains accurate information; or determining whether or how to exercise her powers to remove improperly delivered information from the register or to resolve inconsistencies on it.

It is suspected that a significant amount of fraudulent information is already on the register. The power will therefore apply to existing register information as well as to all new information submitted to the registrar. The clause will also make it an offence for someone to fail to respond to the registrar’s request for information without a reasonable excuse. The maximum penalty for that offence will be two years’ imprisonment. It is imperative that we equip the registrar with all the tools necessary to challenge dubious information and ensure the integrity of the register. The power in the clause is the cornerstone of that ambition.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Ms Elliott. I thank the Minister for his remarks. We support the clause, which provides for a power to require additional information. He is right that the proposed new section is the cornerstone of providing the registrar with the powers to maintain the integrity of the register, so we support the clause.

--- Later in debate ---

[Kevin Hollinrake]

Clause 81 enables the registrar to require a company to resolve an inconsistency where it appears that information contained in a document delivered to the registrar in relation to a company is inconsistent with any other records she holds, including records about other business entities or organisations such as limited liability partnerships and limited partnerships. Currently, the inconsistency resolution power is available only if there is an inconsistency between the delivered information and the information on the companies register.

Where the registrar suspects that information submitted to her is inaccurate, but that suspicion is based only on information that she holds but that is not published on the register, for instance information gleaned from law enforcement agencies—that is the point the right hon. Member for Birmingham, Hodge Hill just mentioned—she will be able to issue a notice to require the company to correct the mistake. The clause will strengthen the registrar’s ability to ensure the register is accurate and reliable.

Government amendment 13 and new clause 7 are concerned with the identification and rectification of discrepancies between information that businesses, such as banks, lawyers or accountants, obtain in the course of their business relationships with customers, and information that the registrar curates. In our White Paper in February, the Government committed to expand current discrepancy reporting requirements to include discrepancies in director information and in registered office addresses. That would build on the discrepancy reporting that already occurs under the money laundering regulations in relation to beneficial ownership. It is a key part of our vision for Companies House reform that there are active and effective feedback loops from the private sector to help the registrar maintain the accuracy of the data she holds. This will benefit business and help protect personal information.

The power inserted by new clause 7 introduces a regulation-making power into the Companies Act 2006. Regulations made under that power can set out who must check for discrepancies and what information they check, beyond just discrepancies in relation to beneficial ownership information. The regulations can also be used to create offences for failure by those obliged to check for discrepancies to comply with those obligations.

Government amendment 13 omits section 1095A from the Companies Act. This power to resolve discrepancies in certain circumstances is no longer needed because of the wider power introduced by clause 82, which enhances and rationalises the registrar’s powers to remove material from the register. Proposed new section 1094 of the Companies Act, as substituted by clause 82, gives the registrar the power to remove material on the register where it has not met proper delivery requirements or is unnecessary. The registrar could exercise that power on her own motion, or on application.

Clause 82 will strengthen the registrar’s powers, enabling her to proactively clean up the register. The power is safeguarded by the requirement that the registrar may exercise it only if satisfied that the interest of the company or applicant in removing the material is not outweighed by any interest of other persons in the material continuing to appear on the register. That matches the test that the court has to apply, which is the focus of clause 83.

Clause 83 expands the range of people whose interests a court must take into account when considering whether to make an order to remove material that has legal consequences from the register. Currently, a court can only make an order to remove material if satisfied that the material is damaging to a company and removing the material outweighs the interests of any other person in the material in retaining it.

That test overlooks the fact that a person other than the company might have their interests affected by a filing—for example, a person whose name has been fraudulently registered as a director of a company with which the person in fact has no connection. Clause 83 amends section 1096(3) of the Companies Act so that the court must now also take into account the interests of an applicant, who may be different to the company, as well as the company.

[Seema Malhotra]

I have a few questions on the clauses. Clause 81, on the registrar’s notice to resolve inconsistencies, would expand the powers of the registrar to identify inconsistencies by considering all records—it goes wider than just the information on the register. Any notice given would state the nature of the inconsistency and give the company 14 days to resolve it. Could I ask the Minister to clarify what will happen if a company exceeds this 14-day period?

On new clause 7 on the power to require businesses to report discrepancies, I want to understand how that might be operationalised. Would the registrar seek information from businesses, or would businesses be expected to do something without being requested to? It was not quite clear how the measure would be used. On businesses that might come under scope, the Minister mentioned financial services, but the proposed new section under new clause 7 refers to regulations imposing requirements on

“a person who is carrying on business in the United Kingdom”.

Any company or business may be required to report discrepancies. It would be helpful to understand that point, as there is a fair bit of detail in new clause 7. I would appreciate the Minister’s comments on that.

Clause 82 creates a new power for the registrar to remove information that was submitted to it and accepted despite not meeting proper delivery requirements. There may well have been reasons for the information being accepted. As the Minister mentioned in a previous debate, for some reason there may have been a minor issue that was considered not significant—I think he may have used the word “material”—and the information did not meet proper delivery requirements. Could I clarify whether the Minister would expect there to be any notification to directors or officers about material being removed? Would any note be made on the register as a record of material having been removed? It would simply be a matter of putting on a company’s record that material was there and accepted even though it did not meet properly delivery requirements and was subsequently removed. It is not about there being a risk of a cover-up, with material being removed, but it is helpful to have an audit trail. Perhaps the Minister can outline how he envisages that power being used.

Clause 83 amends the Companies Act 2006 so that, as regards material being removed, the court may take into consideration whether the interests of an applicant outweigh the interest of other parties. Can I clarify how this would be used? Would it be used when a third party did not believe that it was appropriate to remove the material? Who else might the applicant be? I am trying to understand when it might be used and a case might come to court to weigh the pros and cons in terms of parties’ interests in having that material removed. It would be helpful to have some clarity on that.

--- Later in debate ---

[Kevin Hollinrake]

I will first take the latter point, which covers some of the shadow Minister’s points as well. There will be more detail in secondary legislation about how new clause 7 is expected to operate, but it is quite reasonable to think that third party business entities will understand how this should work. Within that, we would expect there always to be a reasonableness defence if an error was made or something was done in good faith. We would not expect a penalty to be applied in that case, but there will be more detail on that in secondary legislation.

The shadow Minister asked what would happen if an organisation failed to comply with a notice within the 14-day period that it is given to respond. There is an unlimited fine, potentially, for failure to comply. Other situations might even lead to somebody facing a prison sentence of up to two years, in certain instances. A lot would depend on the circumstances involved. That also relates to what the hon. Member for Glasgow Central asked.

The shadow Minister asked for more detail about how the relationship between the registrar and third party companies would work. This does not just refer to the financial sector; it also refers to the legal sector. It would pertain to any organisation that is supervised by money laundering regulations. I think that is the extent to which companies would be bound by the rules on checking discrepancies.

The shadow Minister asked whether there would be a flag if a record was removed. Clearly, there will be a red flag for the registrar themselves, depending on the reason why that record has been removed, and that may be something we cover in further detail in secondary legislation. My immediate reaction is that we would not want red flags to be set against a company that had made an honest mistake, because that might unreasonably set some hares running. I am a little concerned that that might happen if we did as the shadow Minister described.

[Seema Malhotra]

For clarity, perhaps I can distinguish the difference between a red flag and a record of what has happened. We keep a record of what happens, but a red flag is a cause of concern.

[Kevin Hollinrake]

Yes. The registrar will have the ability to annotate the register as is appropriate in the regulations we intend to make using the power found in section 1080.

Question put and agreed to.

Clause 81 accordingly ordered to stand part of the Bill.

Clause 82

Administrative removal of material from the register

Amendment made: 13, in clause 82, page 65, line 21, at end insert—

“(6) Omit section 1095A (rectification of register to resolve a discrepancy).”.—(Kevin Hollinrake.)

This repeals section 1095A of the Companies Act 2006 as in practice the only circumstances in which material would be removed from the register under that section are caught by new section 1094 (inserted by clause 82 of the Bill).

Clause 82, as amended, ordered to stand part of the Bill.

Clause 83 ordered to stand part of the Bill.

Clause 84

Inspection of the register: general

--- Later in debate ---

[Kevin Hollinrake]

Members of the Committee might remember that when we discussed the provisions concerning company name change directions last Tuesday, there was much debate about the 28-day compliance period, a topic on which I have since written to the hon. Member for Feltham and Heston. It is fair to say that we might not have exactly achieved a meeting of minds on that occasion, but we will try again today.

I am grateful to the hon. Members for Feltham and Heston and for Aberavon for withdrawing their amendments in the hope that we could get to a place we agreed on. I think we all agree that a company should have a reasonable amount of time to change its name and that we would prefer compliance rather than an imposed solution involving the registrar defaulting the company’s name to its rather anonymous company registration number.

Compliance will, quite legitimately, take some time and effort on behalf of the company. Notice of a proposed change will have to be given to shareholders, and those representing not less than 75% of the total voting rights of eligible shares will have to agree to the change. That is why it is the Government’s position that a company should have a minimum period of 28 days to change its name following a direction, with the possibility to ask the Secretary of State to extend that period where necessary.

Hon. Members are right, however, to be concerned about the harm that can flow from offending names. Where the Secretary of State has determined it appropriate to issue a direction, it will almost invariably be the case that the name’s presence on the register risks causing harm to users. That is why clauses 17 and 18 give the registrar new powers to remove a company name from the publicly accessible part of the register at the point a direction is issued, so any ongoing harm would be curtailed immediately at that point.

The earlier amendments have very helpfully highlighted for us that this ability to remove an offending name from the publicly inspectable part of the register is not available to the registrar in respect of the name change direction and order provisions that already exist in the Companies Act 2006—but it ought to be. New clause 34 addresses that issue, ensuring that the registrar will have the ability to suppress the name and the subject of a direction or order under all circumstances under which one might be issued.

Government amendment 106 ensures that the general right for people to inspect the register does not extend to offending names that have been suppressed. The effect is that we strike a fair balance between allowing companies adequate time to comply with a name change direction and protecting users of the register from harm that might arise from the offending name remaining visible while the company goes through its internal name change process. I hope hon. Members will welcome these amendments, and I commend them to the Committee.

[Seema Malhotra]

I thank the Minister for his remarks, and wish to speak to this group on behalf of my hon. Friend the Member for Aberavon as well. I must say that these provisions are not easy to follow, so forgive me for feeling like I will need to reread Hansard in a darkened room in order to completely follow what the Minister has said.

[Dame Margaret Hodge (Barking) (Lab)]

I do not think any of us understood a word of that. It would be really nice if the Minister could explain it in black and white, because I just could not get what that was getting at at all.

[Seema Malhotra]

I give way to the Minister.

[Kevin Hollinrake]

In layman’s terms, it means that if a company is required to change its name because it could cause harm, the registrar can immediately suspend that name from the register—as we discussed last week—so it cannot cause harm.

[Seema Malhotra]

I give way to my right hon. Friend the Member for Barking.

[Dame Margaret Hodge]

Perhaps the Minister could also explain how that is different from what we agreed last week.

[Seema Malhotra]

I thank my right hon. Friend for her question, which the Minister may wish to answer before I continue my remarks.

[Kevin Hollinrake]

It extends the extent. The registrar did have that power to a certain degree for certain names, but they did not have it in every circumstance, so the Bill extends its right to use the power. Basically, in any situation where a name change is required because it could cause harm to the public, the registrar can immediately suspend that name from the register so that it cannot cause harm in any circumstance.

[Seema Malhotra]

I am grateful to the Minister for his intervention.

The clauses on the register include important provisions related to information sharing and the parameters of information that may be made available to the public. They are hugely important on a number of levels, facilitating access to relevant information for law enforcement and, more broadly, building public trust and confidence in our laws on economic crime. As drafted, the Bill appears to lean much more heavily towards restricting the availability of information to the public, and as we have said, an explanation of the Government’s thinking and rationale on these issues would be helpful for the deliberations of the Committee.

Clause 84 deals specifically with exemptions from requirements to make information publicly available. Exempting information from public disclosure pending verification by the registrar is a reasonable provision, since it could be argued that such information might otherwise give a misleading or inaccurate picture of the registry if certain information released to the public was ultimately excluded on the grounds that it could not be verified.

Clause 84 also deals with the names of companies registered incorrectly or used for criminal purposes. As the explanatory notes confirm, the intention is to prevent such information from being disclosed to the public, but a slightly clearer explanation of those provisions would be helpful. It seems reasonable in most cases to exclude information submitted in error to the registrar. On company names used for criminal purposes, perhaps the Minister could explain whether the intention of clause 84 is to prevent the disclosure of information relevant to a specific ongoing criminal investigation.

[Kevin Hollinrake]

We are not debating clause 84 yet, are we?

[Seema Malhotra]

Have I jumped? That is my fault. I have just checked the grouping, and I see that we are discussing clauses 82 and 83. In which case, I will stop there.

[The Chair]

We are debating new clause 84 as well.

--- Later in debate ---

[Seema Malhotra]

I thought it was clause 84 stand part, clause 85 stand part and clause 86 stand part.

[The Chair]

Sorry, I am getting confused.

--- Later in debate ---

[The Chair]

It is. I do apologise. So are we clear?

[Seema Malhotra]

That is clear. I was slightly confused by the grouping, but that is absolutely clear, and I will continue my remarks when we come to the next group.

[Kevin Hollinrake]

I have nothing further to add.

Amendment 106 agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

--- Later in debate ---

[Kevin Hollinrake]

I can see my notes very clearly. It is absolutely fine.

The amendments qualify the inspection rights in section 1085 of the Companies Act to ensure that certain information cannot be inspected. The information in question comprises company names that have, for example, been the subject of a registrar name- change direction because of concern that the name’s use is for criminal purposes.

The technical amendments to the Companies Act made by clauses 85 and 86 improve the integrity of the companies register and prevent the abuse of personal information held on it. Clause 85 makes amendments that relate to copies of material on the register, clarifying that the right to require a copy of material on the register applies only to materials that are available for public inspection. The clause also removes the option that an applicant has for submitting applications to require a copy of an enhanced disclosure document in paper form or electronically. It allows the registrar to determine the form and manner in which copies of registered material are to be provided under section 1086 of the Companies Act.

[Seema Malhotra]

Clause 84, as I alluded to earlier, deals with names of companies registered incorrectly or used for criminal purposes. The explanatory notes confirm that the intention is to prevent such information from being disclosed to the public. Excluding information submitted to the registrar in error seems reasonable, as I mentioned earlier, in most cases. With regard to company names used for criminal purposes, I would be grateful if the Minister could clarify whether the intention behind clause 84 is to prevent the disclosure of information relevant to a specific criminal investigation that may be ongoing. I am sure that we all agree that sensitive information should not be disclosed if doing so would compromise an active investigation by law enforcement agencies. If, however, all investigations and, where relevant, prosecutions and court proceedings have reached their conclusion, there might be an argument for public disclosure of said information about the company in question to then be permitted.

If it is the Government’s intention to prevent disclosures of company names used for criminal purposes only in circumstances where it is absolutely necessary to do so, perhaps the wording of clause 84, which is currently quite broad, may be usefully amended to reflect that. I am also raising those concerns on behalf of my hon. Friend the Member for Aberavon. Perhaps there could be a specific provision enabling information on such company names to be disclosed to the public once any criminal proceedings are over in cases where there may be a public interest to do so. It would be helpful if the Minister could set out the Government’s thinking on those issues.

Clause 85 amends the Companies Act to give more powers to the registrar, for instance in relation to the format in which information may be provided. The provision enabling the registrar to require an application for access to information to be submitted electronically is broadly welcome, inasmuch as it supports the wider objective of delivering more streamlined and effective services, although it may be helpful for the Minister to clarify when he expects a fully electronic process for members of the public to request and access information held by the registrar to be up and running.

Clause 86 extends the scope for information, including information of the kind covered by previous clauses, not to be disclosed by the registrar. The more general question of what information should be made publicly available, and the criteria on which those decisions are made, will be discussed shortly in relation to the next clause, but I would be grateful for the Minister’s comments.

[Kevin Hollinrake]

Clause 84 relates to issues that we debated earlier. The information in question comprises company names that have, for example, been the subject of a registrar name change direction because of a concern that the name’s use is for criminal purposes. I do not think that there is anything different here from what we have already discussed. It deals only with the exception to the general rule of making the entire register available to the public where the registrar uses her discretion to take a name off the register. It is not related to police investigations; she would suppress the name of a company for other reasons.

Question put and agreed to.

Clause 84, as amended, accordingly ordered to stand part of the Bill.

Clauses 85 and 86 ordered to stand part of the Bill.

Clause 87

Protecting information on the register

[Seema Malhotra]

I beg to move amendment 114, in clause 87, page 68, line 7, at end insert—

‘(7A) Regulations under subsection (1) above may not prevent the registrar from making available for public inspection information mentioned in paragraphs (a) to (d) unless there are compelling reasons for the information to be withheld.

(7B) For the purposes of subsection (7A) above, “compelling reasons for the information to be withheld” include circumstances in which the registrar may decide that public release of the information may result in—

(a) a serious threat to the personal safety and security of the individual to which the information relates;

(b) adverse effects on any investigation by an appropriate officer of a suspected offence under this Act;

(c) adverse effects on the ability of an appropriate officer to impose a penalty for any offence under this Act; or

(d) a clear risk to the national security of the UK;’.

This amendment seeks to expand the registrar’s powers to release information about the Companies House register, where it is in the public interest to do so, while also enabling personal information relating to an individual to be withheld in cases where there are compelling reasons to do so.

It is a pleasure to speak to the amendment, tabled in my name and that of my hon. Friend the Member for Aberavon. It appears at least possible that the Government could place strict limits on the rights of journalists to request information, for example, in connection with investigations that may well be firmly in the public interest. Disclosures of that kind have been seen in the Panama papers and the Paradise papers. Those are just two examples of how important it is that legitimate journalistic access to information held by the registrar must be protected.

It is with those concerns in mind that we have tabled amendment 114. Its aim is to ensure that there is a default presumption in favour of disclosing information in response to a request, whether from a journalist or an ordinary member of the public, and to ensure that legitimate requests are refused only when there is clear evidence of a compelling reason to do so. We believe that the powers granted to the Secretary of State under clause 87, as drafted, are simply too broad. We therefore strongly urge the Government to support the sentiments in amendment 114.

[Kevin Hollinrake]

I am not sure that what we are trying to do here is relevant to the matter that the hon. Lady raised. Amendment 114 would prevent regulations being made to allow the registrar to make information unavailable for public inspection under new section 1088 unless there are compelling reasons for the information to be withheld, which this amendment outlines.

Of course, there are instances where disclosure of information on the public register is inappropriate—I think we have all agreed that through the course of this debate—for instance, where it could lead to an increased risk of fraud and identity theft, or put individuals at risk for some reason, such as in cases of domestic abuse. There are limitations in the extent to which existing provisions in the Companies Act 2006 allow personal information to be withheld from the public register. We want to expand that to ensure that personal information is properly protected.

Clause 87 amends the Companies Act to allow individuals to apply to the registrar to suppress information relating to an individual or address and prevent it from being disclosed or made available for public inspection. That will include their residential address, signature, business occupation, and date of birth in old documents.

--- Later in debate ---

The Government consider that the compelling reasons proposed would have merit where a person applies to protect all of their personal information, in addition to the grounds in the existing regulations. Under new section 1088(2)(b) as drafted, the grounds on which an application may be made can be specified in regulations. The regulations will be subject to the affirmative procedure, so that Parliament can have full scrutiny of the detail. I hope that this provides assurance to Members.

[Seema Malhotra]

I will not push amendment 114 to a vote. It is an area where there is probably further debate to be had but, having reflected on that with my hon. Friend the Member for Aberavon, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Kevin Hollinrake]

As we have discussed, there are instances where disclosure of information on the public register can lead to an increased risk of fraud and identity theft or put individuals at risk for other reasons, such as in cases of domestic abuse. The clause addresses this by amending certain sections of the Companies Act 2006 that confer or otherwise relate to the power for the Secretary of State to make regulations, permitting applications for personal information to be suppressed or protected, which means that the information is not made available on the public companies register.

[Seema Malhotra]

I wish to make a few remarks. I take on board the Minister’s comments, and we all agree about instances where there may be domestic violence reasons, for example, or other security and personal information reasons for why an individual’s home addresses and so on should not be disclosed. As discussed earlier, transparency plays a vital role in building public confidence in our ability to crack down on fraudulent or other criminal abuses of our companies legislation. Arguably, clause 87 grants an extraordinary degree of power to the Secretary of State to specify in regulations not just what information may be disclosed to the public, but who might be permitted to request information in the first place and on what grounds. It is quite a long clause. We had a debate before on the questions about safeguards, some of the uses of those powers and the extent to which there may be information that is not publicly available that ought to be, in the public interest. I would be grateful for a further discussion of the matter. I will work with my hon. Friend the Member for Aberavon to put together a note for the Minister with some more specific points to which it would be useful to have responses before Report.

--- Later in debate ---

New clause 41 would require all persons controlling 5%—we have brought the figure down—or more of the shares in a public company to declare the total amount of their shareholding with the registrar. That would, for example, require a person controlling shares through multiple nominees to declare the total number of shares they control. We know that a lot of Russian kleptocrats, in particular, use the 25% device as a way of hiding—they come in at just under the 25% and therefore get away from our regulations. New clause 42 would require the registrar to verify the identity and shareholding of a person who controls 5% or more of shares in a company when the registrar’s risk-based analysis, as set out in amendment 116, has identified a matter of concern.

[Seema Malhotra]

It is a pleasure to speak in this debate on amendments and new clauses relating to clause 88. My right hon. Friend has gone through the measures in considerable detail, so I will limit my remarks, but I want to put on record a number of points about them, because they are important.

Amendments 119, 120 and 116 would ensure that the registrar, rather than carrying out analysis as she sees appropriate, would analyse information in her possession with a view to preventing or detecting crime. I hope that hon. Members agree that we all want the same thing. I also hope that the Minister recognises the work that has gone into thinking this through and seriously considers taking some of the sentiments and wording of the amendments, or perhaps some other wording, to add another layer of robustness to the Bill.

Although the clause does not contain many subsections, it is important, because it is a very big aspect of what we need to be working to achieve and supporting the registrar to achieve, yet it does not go into much detail about Parliament’s intentions and what the Minister expects. The Minister and I disagree slightly. Although I agree that some of the amendments might be slightly more prescriptive than we might like—that is partly about probing and making points on the record—the clause sets out remarkably little direction on a very big part of what we want the registrar to do. I hope that the Minister will be able to reflect on the amendments in the round in the context of adding a layer of robustness to the Bill by ensuring that the registrar is clear on her duty to use the information available and the importance of doing so, and therefore giving confidence. Sometimes when legislation is a little too broad, or not clearly interpreted, it can lead to inertia. It is not always clear what can be done or what was intended by Parliament. Therefore, the reaction is to do less just in case something would cross a line. That is where clarity on how the legislation will be interpreted is important. If there are ways in which we can go further without a downside, we should consider them.

Amendment 120 would ensure that, in carrying out the analysis, the registrar will make use of the power to require additional information under section 1092A, where the registrar considers that additional information may contribute. Making that explicit would be helpful. Amendment 116 would require the registrar, when analysing information for the purposes of detecting and preventing economic crime, to take a risk-based approach. I think that we all agree on that, but my right hon. Friend the Member for Birmingham, Hodge Hill expressed what we expect from the police in terms of thinking a little more widely in relation to the prevention of crime.

We do not seek to extend the requirements too far beyond what is practical for the registrar to do, or to detract from their main responsibilities. This is complex, and it is important to think about the role and objective of prevention, and to give some greater clarity about what might be expected by Parliament in relation to achieving it. Where the risk-based assessment that could be carried out identifies a matter of concern, it would be clear that it was Parliament’s intention that further analysis that may be needed can be carried out, and that information can and should be shared with the relevant law enforcement agency.

As we have stated, the amendments would help to ensure that the legislation in the end does in practice what it sets out to do. That is what we all want to achieve. Indeed, the amendments would give a little more shape to the proactive role that Companies House would have in detecting and preventing economic crime.

I will speak briefly to new clause 37, tabled by my right hon. Friend the Member for Barking. We welcome the new clause, which would insert a duty on the registrar to check an individual’s person of significant control status. That would apply where the registrable person’s identity is verified in the way that she outlined. The registrar would then take steps to ensure that the registrable person whose identity is being verified is indeed a person with significant control over the company. The new clause would ensure that, where there is an identified risk suggestive of potential economic crime with regard to a registrable person who is a person of significant control, that person’s status is then investigated by the registrar or put forward for further investigation, depending on the circumstance.

As we have called for throughout the Committee, we must ensure that the Bill acts on its aims and helps move and encourage Companies House to shift from being a passive administrator to a proactive agent, because Companies House plays a very important role as a first line of defence. The new clause would do just that. I welcome the Minister’s thoughts on these measures. If he opposes the new clause, as he has hinted he might, can he see some arguments for adding some necessary teeth to the legislation, and might he bring forward suggestions of his own?

New clause 38 would provide that in a case where the registrar’s risk assessment under section 1062A(1A) has identified a matter of concern in relation to a dissolved company, the registrar must examine the accounts of the dissolved company with a view to establishing whether any economic crime has been committed. The registrar must share details of any evidence gathered under subsection (1A) with the relevant law enforcement agencies. We welcome the introduction of the new clause, as it would ensure that directors of companies that have been set up and used for fraudulent or criminal purposes are unable to simply dissolve the company to avoid scrutiny or investigation before potentially committing a similar offence with another company.

R3, the insolvency and restructuring trade body, said in its written evidence to the Committee that

“the Government has missed a crucial opportunity to truly close some of the loopholes currently exploited so easily by fraudsters. The Bill’s proposals will be limited in their efficacy to bring about real change to preventing and disrupting economic crime if companies used as vehicles for fraud continue to be dissolved and struck off the Companies House register automatically, with next to no due diligence carried out to ascertain whether the company has been involved in fraudulent activity”.

New clause 38 would tackle precisely that issue, which has arisen in other parts our debate, and introduce the due diligence necessary to ascertain whether a dissolved company has been involved in criminal activity. In its evidence, R3 outlines that around 400,000 companies—I think the Minister also cited this number—are dissolved and struck off the Companies House register each year. We would be grateful if the Minister responded to what we see as a loophole and, in light of previous discussions, explained whether it goes as far as it could.

I will speak briefly to new clauses 41 to 43. New clause 41 would require a person who controls 5% or more of the shares in a public company to disclose the total amount of their shares to the registrar. It would also require a person controlling shares through multiple nominees to declare the total number of shares they control.

New clause 42 would require Companies House to verify both the identity and the shareholding of a person who controls 5% or more of shares in a company where the registrar’s risk-based analysis set out in amendment 116 has identified a matter of concern. New clause 43, tabled by my right hon. Friend the Member for Birmingham, Hodge Hill, would introduce a new provision requiring disclosure of shares held by a nominee. Under the new clause, any person holding shares in a public company as nominee for another person must disclose that fact to the registrar. The registrar may also impose a penalty on any person who fails to comply.

--- Later in debate ---

[Kevin Hollinrake]

Currently, the registrar cannot proactively share the information she holds on businesses and individuals that is of use to law enforcement agencies and regulatory bodies. Nor can she carry out routine analysis to spot patterns of behaviour that are indicative of criminal activity. The clause inserts a new function for the registrar so that she is obliged to undertake such analysis as she considers appropriate for crime prevention and detection purposes, such as spotting fraudulent activity. That will provide the statutory basis on which the registrar’s new intelligence hub will be founded. The hub will be instrumental in identifying strategic and tactical economic crime threats posed by information on the register. That has long been called for. Under the data sharing powers that sit elsewhere in the Bill, the registrar will be able to proactively exchange the fruits of her analysis. The new clause is critical in supporting law enforcement agencies to tackle economic crime.

[Seema Malhotra]

As I have said before, we do not necessarily have any problem with what is in the Bill. It is about what is not in the Bill. The clause is important. We have debated how it can be improved and I am sure we will come back to debate that further. On the basis that it is an important part of the Bill, we support clause stand part.

Question put and agreed to.

Clause 88 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Scott Mann.)