PARLIAMENTARY DEBATE
Economic Crime and Corporate Transparency Bill (Fifth sitting) - 1 November 2022 (Commons/Public Bill Committees)

I beg to move amendment 77, in clause 1, page 2, line 10, at end insert—

‘Objective 5

Objective 5 is to act proactively by—

(a) making full use of the information, intelligence and powers available to the registrar in order to identify issues of concern, and

(b) sharing information about any issues of concern with relevant public bodies and law enforcement agencies.

(2) In this section, an “issue of concern” includes—

(a) inaccurate information,

(b) information that might create a false or misleading impression to members of the public,

(c) an unlawful activity.’

I will come back with further mention of the clause later. The amendment was tabled by my right hon. Friend the Member for Barking—[Interruption.] Who has just arrived—

My right hon. Friend will want to speak to her own amendment, but I will lay out a few comments. She is right that we need Companies House to become a more active agent in our efforts to combat economic crime as a result of the Bill—I am sure the Minister will agree that we do not want an economic crime Bill No. 3 in the House, and nor do we have the time for delay in sharpening our response and defences against economic crime.

In evidence given to the Committee, Thom Townsend from Open Ownership stated that the clause—or the important objectives laid out in it—

“seems like a ridiculously low bar.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 63, Q136.]

He is absolutely right. I am sure that all Members listening to that evidence agreed. My right hon. Friend will speak to her own amendment, but we very much support it, because this House needs to send a clear message about our expectation of a proactive role for the registrar—not just a reactive role.

Why is it so important to do so now? As Companies House now begins its transformation to reform its systems, processes and capabilities, part of that will be about its culture, and in line with what this House will expect, the proceedings of this House and this Committee will be important in sending that message. It is our job to ensure that the objectives and powers are very clearly laid out in legislation, so that there is no confusion over our expectations.

The fifth objective in the amendment would raise the “ridiculously low bar” of the first four objectives, as stated by Thom Townsend, from minimising risk to proactively identifying suspected uses of the register for criminal purposes and acting accordingly. As the Secretary of State herself stated on Second Reading:

“We want to ensure that there are more restrictions on who can register with Companies House so that we prevent the abuse of the regime.”—[Official Report, 13 October 2022; Vol. 720, c. 285.]

But I am sure that my right hon. Friend the Member for Barking will want to speak to her own notes on this. Thank you, Mr Robertson, for giving me the opportunity to do so.

Sincere apologies for being late, Mr Robertson. I want to start by welcoming the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Thirsk and Malton, to his role. I have worked very closely with him over the past few years, and it is great to see somebody who understands the issues sitting in his seat. I hope that we can have very positive engagement with him while considering the Bill.

Like the hon. Gentleman, I welcome the reforms. The amendments that we have tabled, including this amendment, are all designed to improve the quality of the legislation that we pass. I hope that they will be taken in that spirit. Having been a Minister in my time, I am very aware of the fact that when amendments are tabled by hon. Members, whether they are on the Opposition or the Government Benches, there tends to be a mood of “reject” from the officials advising the Minister. I simply say to him that many of the amendments that we are putting forward, like this one, are really there to improve the Bill. They are not about trying to raise contentious issues. Perhaps as we proceed, we will come across more contentious issues, but this amendment is not contentious; it is simply to secure an improvement. It is not party political, and I think it reflects common sense. I hope that the Minister will feel able to accept this particular amendment.

Why have we tabled the amendment? I draw the Minister’s attention to the Government’s own factsheet on the Bill, which states that broadening the powers of the registrar of Companies House is designed—that is my word—so that the registrar can become a “more active” gatekeeper over company creation and a custodian of more reliable data. Companies House itself has six strategic goals, one of which is to combat economic crime through active use of analysis and intelligence. We have there a commitment from Government and from the organisation itself that it should take a proactive role in using the information that it has.

Our amendment would embed in legislation the Government’s intent and the organisation’s goals. It would ensure that that intent and the goals were on the statute book and therefore implemented in the future. Too often, as the Minister knows, we have organisations and bodies that have powers but simply do not use them. We can think of His Majesty’s Revenue and Customs and its oversight of company service providers as just one example of where there is a power but, without emphasis on that duty in legislation, it tends to get ignored. The aim of our amendment is just to ensure that what is a power becomes a strong duty.

Why does that matter? Companies House holds a massive amount of data: information about 4.5 million companies, with more than 800,000 new companies incorporated each year and more than 10 million documents filed annually. That data is full of red flags that should be proactively investigated to ensure that we really bear down on economic crime. We want to pursue the wrongdoers, and if we get that stronger investigation and it is known that Companies House does use its proactive powers, that is a good preventive measure because it is much less likely that the ne’er-do-goods will indulge in bad practice.

Let us look at the sort of stuff that has come out so far. There are endless examples: five beneficial owners control over 6,000 companies—a massive red flag. They are clearly not the real beneficial owners. Four thousand beneficial owners are under two years’ old, including one who is not born yet. The company Atlas Integrate Services LLP was registered in September this year. The person of significant control in that company is just two months’ old. In her two months of life, she has not just found time to start a business but apparently has got married, as she is listed as “Mrs” in the register.

We know from all the leaks how Companies House and our UK corporate structures are used and abused by bad people. I take just one example from the FinCEN files: 3,267 of the LLPs and the LPs were holders of bank accounts that involved suspicious transactions—British corporate structures. Of those 3,267 British corporations, 1,656—over half—were created by just four agencies. Nine agencies created more than 100 UK entities. One agency created 646 limited liability partnerships and limited partnerships. Those are examples of strong red flags that suggest malpractice.

It is not just the perpetrators who benefit but the victims who suffer, as the Minister knows. The only successful prosecution in this space is that of Kevin Brewer—the Minister will probably remember the case. This was a man in his 60s who deliberately set about showing the flaws in the system in Companies House. He set up a company called John Vincent Cable Services Ltd, when Vince Cable ran the Department that the Minister is now in. He did that in 2013. He then wrote to Vince Cable to tell him what he had done.

In 2016, he used the names of James Cleverly and Baroness Neville-Rolfe to set up another company. Again, he wrote to them. All he was doing with drawing attention to what was wrong with the system, but he was prosecuted. The Government proclaimed that prosecution as a great victory of how Companies House is vigilant over the quality of the data. Nothing could be more wrong. I think the Minister will agree that, in effect, he was a whistleblower. He was treated abominably by the authorities. That throws into stark relief the lack of action taken against others responsible for setting up bogus companies.

I urge the Minister to accept the amendment. It is common sense. It simply ensures that there is a strong duty on Companies House to use that wealth of data to investigate, proactively raise red flags and talk to the enforcement agencies. I hope that he sees the amendment as something that adds to the value of the Bill.

I join my colleagues in welcoming the Minister to his post, in what is a very welcome appointment, and I apologise to you, Mr Robertson, for being slightly late this morning.

Surely the Minister must see that there is a world of difference between action to promote the virtue of something and action to prevent the badness of something. I have been a Minister too. I have created Government agencies. I have tried to enshrine objectives in agencies, from which a business plan is then written. It is incredibly important to say what we mean and mean what we say when we are specifying the objectives of an agency such as Companies House. I urge him to think again about the amendment. It is not simply a matter of word play. It is about doing what is needed to be done.

I am grateful to the Minister—I know he is struggling. Why not put this objective in? If Companies House is going to do this work anyway, what is the objection? Why not let it stand there? It will ensure the work over time. Our lives are always short as Ministers. The Minister is not going to be there all the time. Other people are going to take over from him. We want Companies House to be proactive throughout the time that the legislation lasts. Why not put this objective in?

The only reason I can think of for why the Minister is getting objections from his civil servants—I assume the objections are coming from them—is that Companies House will not carry out this proactive role, because it will prioritise its other role of verifying information, and we will lose the advantage of the wealth of data with integrity that we could use to eliminate the wrongdoers.

On this occasion, having heard what the Minister has said, I think that this is an ongoing debate. We will want to have some further discussion and perhaps come back to the issue on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 71, in clause 1, page 2, line 10, at end insert—

“(4) The Secretary of State must ensure that the registrar has sufficient resources to fulfil the objectives set by subsection (3).”

This amendment would require Companies House to be properly resourced in line with its new responsibilities.

Much like with the previous amendment, it seemed sensible to bring things to the attention of the Government right at the very start of the Bill, because matters can get diluted over time. If we put this issue front and centre of the Bill, and say that the Secretary of State must ensure that the registrar has sufficient resources to fulfil the objectives set by subsection (3), that puts an obligation on the Government, and on future Governments, to follow through on the recommendations regarding the very worthy legislation in the Bill.

We heard a lot of evidence about earlier legislation. I served in Committee on some of it, such as in the evidence sessions for the Joint Committee on the Draft Registration of Overseas Entities Bill, and in Committee for the Sanctions and Anti-Money Laundering Act 2018. Over the years, there has been much legislation, but, as Bill Browder said in his evidence, without any enforcement of that legislation, and without the resources to ensure it is followed through, the Government can write as much law as they like but it does not actually matter.

We want to see resources put front and centre of the Bill, right up there at the start, and to hold future Governments to the important principle of funding this work. If the registrar is not funded to carry out the work it is being given to do, it just will not do that work. That has been the evidence of Companies House over many years. If it is not funded as well as empowered to do the work, it seems very unlikely that it will complete the tasks that the Government and all of us in this room expect of it. I therefore think the amendment is important and urge the Minister to accept it.

The amendment tabled by our SNP colleagues would amend clause 1 to require the Secretary of State to ensure that Companies House is adequately resourced to achieve its objectives. I raised the matter on Second Reading, and I am sure we will come back to it.

On Second Reading, the Minister himself talked about legislation with implementation, and I am sure that he will have some sympathy for the sentiments of the amendment. As Jonathan Hall said in his evidence:

“The one thing that I think would make all the difference would be to resource Companies House.”––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c. 34, Q70.]

We support the principle of the amendment, but we are looking to address the same issue in our new clause 26, which we will discuss later. It is right to put the issue on the radar today and have it on there as we proceed through Committee. I look forward to coming back to further discussions on how we ensure that Companies House is adequately resourced.

This is an important debate, and I think that the Minister’s reply will be, in a sense, a useful “Second Reading” debate on how he will deal with the problem of resourcing. I know that he, as a new Minister, will have spent the weekend reading all of the evidence that we gathered last week. It was very much like an autopsy on the state of economic crime in our country—grisly and appalling. He will have been not shocked, because he is familiar with the facts, but reminded starkly that he is a Minister at a watershed in the debate. It is clear that the time to act is now.

The world is divided, and there is a great kleptosphere from Kaliningrad to Kamchatka, so it is important that we set out our stall as a place not just of free trade, but of fair trade, as well as, crucially, clean trade. That is where economic advantages will flow from in the years to come. It is therefore a matter of enormous national shame that we have become such a hotbed of money laundering. It is appalling that about 40% of the corporate structures used for Danske Bank money laundering were here in the UK, and appalling that we have become such a country.

Hundreds of billions of pounds-worth of money stolen from the Russian people has been laundered through UK corporate structures, yet last week we heard from Bill Browder and Catherine Belton that UK corporate structures are absolutely being used by friends and allies of President Putin to move money abroad to help to finance Russian intelligence operations and other nefarious activity. However, as Mr Browder said, we are not prosecuting the crime and, as my right hon. Friend the Member for Barking pointed out, there has been only one prosecution despite hundreds of billions being stolen and moved through UK corporate structures.

In part, we are not prosecuting the crime because we are not policing the crime, and all of us on the Committee will have heard loud and clear last week’s evidence from City of London police and the National Police Chiefs’ Council, which said that they need more resource. It is as simple as that. They cannot afford the specialists they need to police this area, and the task of policing such crime would be an awful lot easier if we ensured that there was a proper gateway doing its job in Companies House.

We know that Companies House needs more resource as there has already been a wide-ranging debate. Indeed, the Minister, in his pre-ministerial life, is on the record as having speculated about what some of the resources might need to look like. We hope he will repeat those comments on the record as a Minister of the Crown in the Committee today.

Let us be clear about the risks, which were starkly described for us last week by the independent reviewer of terrorism legislation: there is a direct relationship between economic crime and national security. This is not simply a question of bad people stealing lots of money from good people; it is about a threat to our country. The Minister has an opportunity to ensure not only that our economy is operating on a clean-trade basis, but that our national security defences are strengthened. That is why the amendment is important, and why it is important that the Minister set out clearly today how he is going to approach the solution to this problem.

I agree, but the point with Danske Bank, as with so many of these massive scandals, is that it was a whistleblower who uncovered wrongdoing, not the enforcement agencies. We will come to whistleblowing later in our considerations, but what we want is for the enforcement agencies—in this case, Companies House—to be equipped to do the work themselves and not to rely on whistleblowers.

The Minister is being characteristically generous in giving way. The point about Danske Bank is that the money was moved through UK corporate structures that should not have been set up in the first place. If we had a stronger verification regime—if we had a stronger set of obligations on Companies House and a better-resourced Companies House—we would surely have run a chance of the crime being prevented, because the checks would have created a tripwire that would have stopped the structures being set up and the money being moved through them. The point about resources and duties is incredibly important.

We are very quickly getting to the crux of the issues on resourcing for implementation. He referred to independent experts coming in to work with Companies House on its new capabilities and how it will need to be resourced. Will there be a recommendation from those experts on how much resource will be required? We have the objectives and we have debated whether they are sufficient to achieve the goals of the Bill, and we will come back to that point, but will there be a recommendation on how much resource is required and will that recommendation be a matter of public debate?

I suppose we may as well get all the details out now. The estimates for how much extra resource Companies House might need range from three times to 10 times its current level. I was very surprised to hear from Companies House that it was proposing to employ only 100 extra people. That is an increment of about £5 million to £6 million extra, which feels radically short of what is proposed and for the implications of the Bill. Will the Minister therefore put our minds at rest by saying to the Committee that those figures will be radically improved when the Companies House business case for the next financial year is approved?

My intervention also relates to that of my right hon. Friend the Member for Birmingham, Hodge Hill. There is a risk of underestimating the amount of work, and of that then being locked in. I hope that during the course of the Committee, if we are to use our time to best effect, there will be further challenge to the scope of the work or to the expectations of how much work happens. We do not want the scoping for resources to be based on the Bill at the start; that is not necessarily what it will be at the end. Will the Minister clarify that the resourcing plan will be made in light of the ambition of the Bill, because we do not want it to fall short? The Minister’s words—about legislation with implementation—will keep coming back to him, and I am sure he is the first to want not to fall short of them.

They are good words.

My sense is that the Minister will steer clear of specifying the order of magnitude by which we need to increase Companies House resources. That is a disappointment to many of us, but will he therefore advise the Committee how as a House of Commons we best guard against the risk of under-resourcing Companies House once the Bill has reached Royal Assent?

We do. That is exactly what we want to do.

Several things arise from the Minister’s great contribution. First, I look forward to his support for our amendment to ensure proper parliamentary scrutiny of the work of Companies House, which will come later in our consideration of the Bill. Secondly, one knows how spending reviews go, and this will never become a top priority. I hope that the Government will see it is a security issue, but until they do so, it will not become a top priority for expenditure. That is why the Opposition—supported by the Minister, I hope, given his passion—want to put a figure into the legislation, to link it to inflation and to ringfence it, so that no Treasury official down the line can get hold of it. The final thing I wanted to ask—

I will be brief. We think that Companies House has to do more in a whole range of areas if it is to be effective, such as on information on directors and proper control of company service providers. We do not want to create another cohort of people who allow bad things to take place. Those things will require greater resources. Will the Minister make a commitment today on that? If we are successful in passing the amendment, will he take those things into account when thinking about the financing?

I would like to press the amendment to a vote because it does not set a figure or commit the Government to any particular sum of money, but guards against the under-resourcing that has plagued Companies House for many years. According to openDemocracy, economic crime costs the UK £290 billion a year, whereas Spotlight on Corruption tells us that the Government spend only £852 million on enforcement, or 0.042% of GDP. A lot more needs to be done. I am not committing the Government to any figure whatsoever, but the amendment would ensure that the register has the resources to fulfil its objectives. It is a simple and neat amendment.

Question put, That the amendment be made.

I am grateful to the Minister. Now that we are debating clause stand part, perhaps I can officially say “welcome” to him—I was saving it until now. It is indeed good to see him in his place and to be having the debates with him on the Front Bench.

We have debated aspects of clause 1, and have raised relevant questions. The issue is not whether we agree with the objectives, because of course we agree with all the objectives that have been outlined. The issue is whether they go far enough. Objective 1 is about delivering documents to the registrar. Objective 2 is about those documents containing all the information that they are required to contain. Objective 3 is designed to minimise the risk of information on the register creating a false or misleading impression to the public. Objective 4 is about minimising the extent to which companies and firms carry out or facilitate the carrying out by others of unlawful activities.

I think we might ask ourselves the question again and again: why has it taken this long to get here when we have been having debates on the need to tighten up Companies House for so long and legislation has been promised for some time? When we read the provisions, I think we can say again: is this really the extent of our ambitions? Getting to second base is not the same as getting a home run, is it? I think that is the question and will remain the question. Although we agree with clause 1 and what is in it, we are going to keep asking the question about whether the basis on which so much else will be based in the Bill will be strong enough to give Companies House all it needs, along with the message about its duties to achieve its objectives.

This legislation is designed to tackle economic crime. As we have heard in the debate, it is also designed to protect UK national security. Those are two really serious matters that go together. We are talking about making it harder for kleptocrats, criminals and terrorists to engage in money laundering, with an impact on other crimes: crimes that go on in our streets, crimes related to drugs, crimes related to low-level theft and, now, even the security of our mobile phones and our data and conversations. So much more is at stake in terms of what goes on in people’s everyday lives and their everyday security, much more than perhaps we envisaged when this legislation was first promised at least six years ago. The scale of the challenge has absolutely increased, and the question is as much about whether we will be forward-looking in the legislation as it is about tackling the scale of the problem, on the basis of which legislation began to be drafted perhaps one or two years ago.

I think this has been a disappointing start to the Committee. Last week in the evidence sessions, I read out the objectives and asked the witnesses what they thought of them. We had anti-corruption organisations there—people who have given their lives to tackling corruption and economic crime—and they were very clear, saying the objectives were too weak and needed to be stronger. I will set out the politics of this for the Minister, new in his role as he is. He is on the wrong side of the argument. He risks going into the debates we are about to have as someone who it is too easy for His Majesty’s Opposition to characterise as soft on economic crime. That is not his position. It is not a position he wants to be in. I hope he will reflect on the debate we have had today and come back with stronger and proactive anti-corruption objectives, including a duty to prevent corruption placed on Companies House.

To summarise the debate we have had, we are going to have a set of objectives for Companies House. Then we are going to match the resources to those objectives. The problem with setting the bar for our objectives too low, too soft and too weak is that we end up setting a resource base that is too low, too soft and too weak. On this side of the Committee—on both sides I think—we would rather see a much tougher set of policy objectives, and we would want Companies House to have the requisite resources to fill that role. I am afraid the Minister has found himself on the wrong side of the argument today. I hope that he reflects and comes back—possibly on Report or in the other place—with a strong set of objectives and the resources to match.

I beg to move amendment 85, in clause 2, page 2, line 15, at end insert—

“(2A) After subsection 1, insert—

‘(1A) The memorandum must also state—

(a) the nationality of the each subscriber; and

(b) the country in which each subscriber is ordinarily resident.’”

This amendment would require a memorandum on the formation of a company to include the nationality and country of ordinary residence of each subscriber (a subscriber being one of the company’s initial shareholders at the time it was set up) along with their name.

Clause 2 is important, and we have no concerns with it at all. It amends section 8 of the Companies Act 2006 to state that, for individuals, “name” means a forename and surname, and it goes into further detail. It is another example of an area where it is extremely surprising that our system has lasted for so long while being so feeble in the extent of the information it requires of company subscribers. Subscribers are initial shareholders in the company when it was set up: those who sign the important memorandum of association in forming the company.

Currently, information about subscribers is extremely limited, and there is no verification or definition of what constitutes a subscriber’s name. That relates to the deeper issue, to which we will continue to refer in Committee, around the transparency of shareholders. Alongside our discussions of directors and officials, we must ensure that we keep shareholder transparency very much centre stage. Not having clear names affects the reliability of the subscriber information held by Companies House.

We welcome the clarity provided by clause 2, but we believe that the Bill could go further in requiring information from company subscribers. That is why we tabled amendment 85, which would insert a new provision that would require the memorandum on company subscribers to include the nationality of each company subscriber and the country in which the subscriber is ordinarily resident. Without that information, which should be verifiable, the formation of a company that registers with Companies House could be questioned by the registrar.

Transparency International has remarked that the UK has a terrible reputation as a hub for dirty money. That is something we do not even need to keep saying, because we are so used to hearing it. That is exacerbated and enabled by a lack of transparency about those who own and control UK-registered companies. If the Bill is to fulfil its ambition of clamping down on dirty money flowing through our economy, the Minister should support the amendment, which would provide that greater transparency and scrutiny of who owns companies registered with Companies House. I look forward to the Minister’s response.

I rise to support this useful amendment. It is fundamentally about enhancing the transparency of the register and what we know about the people on the register. It is also about tracing control: who owns what and where they happen to be. That is useful. Those are things that the Bill should look to fix. The Bill is about putting right things that are not quite right. The amendment adds to the richness of the information that is available to people. It seems perfectly logical that the Minister should support it.

Let me go back to 1855 for a moment, which is when this House last debated the creation of limited liability companies. It is worth every member of the Committee studying the Hansards of those debates, because the speeches reveal that, when our ancestors in this place made it possible for people to pool together small amounts of capital but nevertheless receive a limit on the liability that they would encounter if things went bad, their view was that it was in the common good of the country to allow in Britain the invention of limited liability, which had operated in the United States for some time. The common good of the country was the guiding principle by which the debate was shaped, and eventually the Bill was passed.

Right now, too many people are not contributing to the common good, and are using UK corporate structures to circumvent their obligations to pay tax and obey the law of the land. We should be trying to crusade against that, and this amendment would help us do that.

At the end of this year, the register of beneficial ownership for property will be published, but it is already clear that there are shell companies that own assets, including property in expensive parts of this country, whose nominal shareholders are resident abroad. There has been an enormous surge in non-resident, foreign national shareholders of shell companies that own property in this country. We have not only the phenomenon of shell companies but, as Oliver Bullough made clear, the new phenomenon of shell people.

The Minister has a decision to take. Will he put in place measures that help us guard against that risk and ensure that we honour the principles that were agreed back in 1855, or will he leave our enforcement regime as weak as it is today?

Is the Minister minded to use that power to enter the nationality of individuals on a company’s register of members?

In the light of that remark, will the Minister go further and tell the Committee how he will tackle the problem of shell people if we are unable to get information about them? Shell people is the phenomenon of having what look like foreign nationals or residents of other countries controlling shell companies, which may, in turn, own assets in this country. If it is not possible for us to establish the nationality or the ordinary residence of those people, how will we know whether we have a problem? If, for example, people put down their nationality as British, we would know where to find them, but if we do not have that information, we risk getting a little lost.

Such as Russia.

We might as well pursue this point while we have the time. The 25% threshold is obviously very high, and an amendment will be tabled seeking to lower it. If that does not go through, however, the risk is that there will be members on the register with a significant or even a controlling stake of below 25% in a company, yet we will not know where they are resident or where they live. We are now running that risk.

How will the exemption be defined? Will the regulations confirming the exemption be subject to the affirmative procedure? Also, I draw to the Minister’s attention an example that he could look at: Fedotov took advantage of exemptions to use Russian stolen wealth in the UK. These exemptions are very dangerous; I want to hear from the Minister how we will ensure that they are properly regulated and monitored by Parliament.

I am worried about this. Will the Minister look at how Fedotov managed to get an exemption, and then perhaps write to Committee members about it? Then we could see whether there is a systemic issue, and whether we ought to have a better overview of the way in which exemptions are determined.

This is about new registrations. Will the registrar go back through the Companies House records to find people who may still be on the register but ought not to be, because they have been disqualified?

It is a pleasure to speak to clause 2 and to clauses 3 to 8. I have been listening carefully to the Minister and have a few questions. I have made extensive remarks in support for clause 2, so I do not intend to go much further on that. Suffice to say that we have had an important debate, and I think the Minister will find that we will continue to come back to some of these matters.

On the point about the nationality of the subscriber and the country in which they are ordinarily resident, I did not hear the Minister give a clear answer as to whether the Government might consider tabling future amendments if they do not want to support ours. I have good faith in the Minister and want him, on day one of taking up his responsibilities, to take on board hon. Members’ points, so I would be grateful if he could come back to us on how he plans to consider that matter. My hon. Friend the Member for Aberavon may want to apply a similar principle to other clauses, so it would be most helpful if the Minister could take away the point about the subscriber’s nationality and the country in which they are ordinarily resident.

We support clause 3, which will ensure that when a company registers, it cannot be formed for unlawful purposes. It is extraordinary that we have not made that clear before or sought such a declaration previously, but it is a necessary provision in the light of the scale of abuse of Companies House by those whom we are now seeking to prevent from doing so in the future. We need to clear out companies that are not performing the functions that we would expect of a company registered in the UK. As the Minister goes through the resources question as to how quickly we will be looking to Companies House to go through and verify existing company records, this will fall into that important cleaning-up exercise. It is a necessary provision and is intended to ensure that if such a declaration turns out to be inaccurate, the registrar can reject the company’s filing on the basis that a false filing offence will have been committed. That is an important step forward.

Clause 4 will ensure that when a company registers, it must declare that none of its subscribers—its initial shareholders—is a disqualified director. We welcome the clause, because it is important to think about people’s roles and how games could be played with Companies House, and therefore with Britain and the British public, without cross-checks and balances in place. The clause is necessary to ensure that the registrar is able to actively reject and remove company subscribers who have been disqualified as directors. It cannot be right that somebody who has been found unwilling or unable to meet their legal responsibilities as a director could still be involved in, and have control of, the formation of a new company. It was a loophole in the Companies Act 2006 that a disqualified director was not prevented from owning a newly established company. It was a loophole ripe for exploitation, but we welcome clause 4.

I want to reinforce the last point made by my hon. Friend the Member for Feltham and Heston. If we are going to equip the Minister with new powers, it is important that he tells the Committee, at this stage, how he intends to use them. The key question is: what is his deadline for ensuring that every single company on the register has fulfilled the obligations created by these clauses? Can he clarify what his risk tolerance for bad behaviour will be?

I ask the Minister that because I was forced to table parliamentary questions in October last year, which revealed—extraordinarily—that 11,000 companies on the Companies House register had still not disclosed their persons of significant control, even though it was a legal requirement at the time. That is a very big number, but despite that fact, only 119 convictions had been secured for wayward directors.

If we are going to give Companies House the new obligations and new duties that the Minister is taking through, but they are not going to be enforced, then frankly there is very little point in the Bill. If the Minister is not able to today, I hope that he will write to us later to confirm two things. First, will he confirm that his intention is for 100% of companies to meet their obligations under the Bill? Secondly, I think the whole Committee would welcome his setting out a timescale for seeing that target secured.

That is an important point. The Minister is basically telling the Committee that he wants to ensure that the verification checks are proportionate, but across Government—in the Passport Office, the visa service and benefits agencies—there is a well-established infrastructure for verifying identities. If people are applying to become a director or a person of significant control, it is hard for many of us on the Committee to understand why the checks on their identity should be much lighter than those applying for other benefits from the state.

And the target?

I thank the Minister for his comments. I think he has committed to write to me about nationality and country; he did make a note. Did he make a note? Did I get that right? It is a matter that my colleague will also be raising, but I think he said that he would write to me with the Government’s view on that matter. On the basis of that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.

Clauses 3 to 8 ordered to stand part of the Bill.

Clause 9

Names for criminal purposes

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

We support clause 9. We recognise that it amends the Companies Act to give the Secretary of State the ability to prevent registration of a company if they think the name of that company is intended to facilitate dishonesty or deception. Companies House deals with up to 100 cases of corporate identity theft every month, and given that this form of fraud and others are starting to become more prevalent, it is right that there be these new powers to prevent registration, stemming—we hope—the flow of new fraudulent registrations. An incredible amount of distress arises from the impact of that dishonesty and deception.

Clause 10 inserts into the Companies Act a new section prohibiting company names falsely connected to foreign Governments and international organisations, and the Minister has spoken about why that section is important. It gives the Secretary of State the ability to prevent the registration of a company with a proposed name that, in the Secretary of State’s opinion, suggests a connection with a foreign Government, its offshoots or international bodies where none actually exists. As has been mentioned, that could be the UN or NATO, or any other body. Of course, we support the principle behind that measure, but in the interests of transparency about the use of that power, could the Minister clarify whether, when the Secretary of State is asked to make a judgment in such a situation, he expects that the judgment will be publicly shared—that, for example, Companies House might report on the uses of that power as part of its reporting?

I also want to clarify how the power will be used. When a company is formed that the Companies House registrar suspects is not actually connected with a foreign Government or other international body, but looks like it might be, will the registrar have a duty to flag such instances with the Secretary of State? That is important, because it comes back to the question of the proactiveness of the registrar’s duties, so it would be helpful to clarify it. What about the scenario where an attempt is made to register a company with a proposed name that, were it to be raised, would go through that process and very correctly be stopped by the Secretary of State, but it is not picked up by Companies House? If that situation arose for any reason—it could be new staff, or it could be the pressure of time because of insufficient resources; mistakes can be made in those circumstances—could a third party then apply for the name of that company to be changed? How would that work if it were an international organisation?

If uses of the power were reported by Companies House, would we be able to search and see that a number of people had sought to set up a company called United Nations Associates, or something like that? Would we be able to have a sense of how Companies House is perhaps being used in that way?

Should a company that has had its name changed by direction of the Secretary of State continue to seek to trade under that company name—perhaps in an overseas jurisdiction, if the name is falsely connected with foreign Governments—it would be helpful to clarify what measures could be taken, and by whom, to seek to put an end to that. There may be an obvious answer.

I want to highlight again to the Minister the issues in these clauses that Graham Barrow raised in the excellent evidence that he gave to the Committee last week. He said:

“The Bill does include the ability for Companies House to reject similar names, but if you have 3,000 companies a day—and that extends to companies across the world that may have similarities—I do not see how you are going to enforce that reasonably. There is just too much volume and too many potential comparative data points to compare them to.”

His suggestion was that the system needs to have

“a little bit of friction”.–––[Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 27 October 2022; c. 109, Q204.]

Instead of Companies House turning around an application in less than 24 hours, a little bit of time should be taken to assess and analyse it.

The human element of this process is also important. Some of it may be possible to achieve with clever computer algorithms to sift out any companies whose names are too similar to existing ones, but there needs to be human judgment as well. This goes to the point of Companies House resourcing and staff being able to understand what they see in front of them. That will take expertise and long-term knowledge, not only of the company in front of them but of the existing companies on the register—and they are there in their millions.

I will address a point that has not really been raised before about clause 11 and names containing computer code. When these kinds of things come up, I reach for the expertise that I have pretty much at hand. I went to my husband and asked him about this, because it is his profession—he is a computer coder by trade—so I thank Mr Joe Wright for his assistance. I said, “Is this really a problem, and what does it actually mean?” My understanding is that the clause is to guard against SQL injection into the Companies House register, because anyone pulling that out of the register can have their systems corrupted by companies that register with computer code.

My husband directed me to a very useful article, which people should have a wee look at, by Neil Brown on decoded.legal that looks into this in some detail. A company has been registered using computer code. It was registered under the name ; DROP TABLE "COMPANIES";-- LTD, which has some computer code around it. Dr Michael Tandy registered that company name, but Companies House did not publish the name on its register; it said that the name was available on request. Can the Minister clarify whether the clause will deal with that specific case, or whether it is broader than that?

The article by Neil Brown raises some questions. What exactly would be prohibited? The Bill does not define computer code; it prohibits the use of names that

“in the opinion of the Secretary of State”

are computer code. I do not know whether the Minister knows his SQL from his JavaScript, but that seems like a big judgment and responsibility to put on Government Ministers. In its very essence, computer code is just an instruction to a computer, and that instruction can be in plain English text as well. Can the Minister tell us exactly how this will be assessed and what systems will be put in place at Companies House to define what computer code is, in practice? That, again, comes down to the human element—someone understanding exactly what is in front of them.

I urge the Minister to give a wee bit more clarity about what is code, what is not code and what exactly the clause is intended to catch. There are such companies on the Companies House register, and because code can be in text that we would understand—rather than a series of numbers, letters and symbols—it might be more difficult to enforce this. I would be grateful if the Minister could help us understand a wee bit better how the Secretary of State’s complete discretion to define what is and what is not computer code will be used in practice.

This question is really just for information. Can the Minister explain why the three categories were chosen for inclusion in the Bill? Why are we only looking at these? What was rejected, and why did these three come about? I cannot understand it. Is there a right to appeal if somebody chooses a name for a legitimate reason but it is misunderstood by Companies House? Who will take the decision? Is that something the Secretary of State will delegate to Companies House, or will it have to come up for ministerial approval every time?

A slight aside: some of us had dinner last night with Catherine Belton, and she talks convincingly about the way that companies linked to the Kremlin have individuals who do not reveal that link. The link to foreign Governments is more worrying than the idea of someone abusing the name of foreign Governments to set up, say, a travel agency to go to Russia. That sort of thing seems to me perfectly all right. The other side of this coin is what causes great concern. It can become a vehicle for money laundering and hiding a lot of the Kremlin’s money in banks abroad.

I echo the concerns raised by my right hon. Friend the Member for Barking. She has drawn out some important distinctions. One is where there has been duplicity in setting up a company with a particular name, and there may be good reason for wanting to challenge that. She has highlighted the safeguards, but she is right that we need clarity in relation to kleptocrats and real connections to foreign Governments, which the Bill is trying to stop.

I thank Joe Wright. The hon. Member for Glasgow Central is right, because technology and people who use it are getting more and more sophisticated. Embedded computer code can maliciously infect the systems of those who access or download data. I saw the very real impact of data getting on to servers when I recently visited a company in Liverpool for a roundtable. Their systems had gone down, but luckily they had safeguards to stop what had happened. How quickly viruses, spyware and other means of destruction can travel, and they pose such security risks for companies and countries. That is an important part of our security, so it would be helpful to have some further information on that.

We welcome clauses 12 and 13 as important provisions. Clause 12 ensures that companies cannot use names that are misleading or used to mask criminal purposes. Clause 13 provides a mechanism to ensure that where there is good reason for a direction to change company names, it is not bypassed by those who use the registrar for fraudulent purposes. What enforcement mechanisms would come into force in such situations?

Will the Minister give way?

Could the Minister also clarify his target for compliance? I hope it is 100%, but if he could clarify that as well, I would be grateful.

I am really sorry, but I just want clarification. Does that mean the decision is taken by both Companies House and the Secretary of State—or a Minister on their behalf?