PARLIAMENTARY DEBATE
Economic Crime and Corporate Transparency Bill (Fourteenth sitting) - 17 November 2022 (Commons/Public Bill Committees)

It is a pleasure to speak with you in the Chair, Sir Christopher.

The clause amends section 15 of the Economic Crime (Transparency and Enforcement) Act 2022 to align it with amendments made to section 32 during the passage of that Act and with amendments introduced by this Bill. The clause substitutes section 15 and adds proposed new sections 15A and 15B.

Proposed new section 15 restates and slightly amends the general false statement offence in section 32 of the ECTE Act to reflect changes made by the Judicial Review and Courts Act 2022. Existing section 15 restricts the false statement offence to being committed when a person knowingly or recklessly makes a false statement in response to a notice. Proposed new sections 15A and 15B amend that offence to change the threshold to be met, by splitting it into two separate offences. That aligns with section 32 of the ECTE Act and amendments to that section introduced by the Bill.

Clause 137 amends section 32 of the ECTE Act on the general false statement offence. The effect of the amendment is that both the basic offence and the aggravated offence are expanded so that a false statement offence can be committed by a legal entity, and, where this is the case, by every officer of the entity in default. That maintains consistency with other legislation amended by the Bill. The penalty for committing the aggravated offence on summary conviction in England and Wales is also amended in line with the Judicial Review and Courts Act.

Clause 157 amends the Reports on Payments to Governments Regulations 2014. Those regulations require certain large businesses in the extractive industries to report annually their payments to overseas Governments associated with the extraction activities. The regulations were brought in to support accountability and to reduce space for corruption.

The Government are conducting a post-implementation review of the regulations to evaluate their impacts and effectiveness. However, in advance of that, the Government propose that the false statements offences and penalties in the regulations be updated to provide consistency with other offences, as previously outlined.

Clause 157 does not alter the requirement for any prosecutions for non-compliance with the 2014 regulations to be mounted or approved by the Attorney General or the Director of Public Prosecutions—or, in Northern Ireland, by the Secretary of State or the Northern Ireland Director of Public Prosecutions—to ensure that they are in the public interest.

As for the level of fines, in England and Wales they can be unlimited—level 5 on the scale.

As the hon. Gentleman knows, as we have discussed on many occasions and as I am on the record as saying, legislation without implementation is worthless. We need to ensure that offences are discovered and then prosecuted. Of course, we must ensure that the registrar, and the law enforcement agencies they work with, have sufficient capacity and resources to do the job. The Bill does not cover that directly, but I am certainly keen to ensure that happens.

Clause 138 will improve the effectiveness of the register of overseas entities by defining “service address” so that it has the same meaning as in the Companies Act 2006. That will help those registering as overseas entities to ensure that they understand what a service address is, and that they must provide an address that meets the definition.

The clause amends the Land Registration Act 2002, Land Registration etc. (Scotland) Act 2012 and the Land Registration Act (Northern Ireland) 1970. It will improve the effectiveness of the register of overseas entities by punishing a registered overseas entity for failing to comply with the registrar’s new power—as inserted into the Companies Act by the Bill—to require information from the entity.

Currently, an overseas entity will lose its status as a registered overseas entity if it fails to provide an annual update to the registrar. The clause adds that an overseas entity will also lose its status as a registered overseas entity if it fails to respond to a notice from the registrar requesting information. Once it is no longer considered to be a registered overseas entity, the entity will be treated as non-compliant. A non-compliant entity will find it difficult to sell, lease or raise charges over its land and cannot therefore deal freely with it.

Upon submitting the requested information to the registrar, the overseas entity will once more be compliant. However, the compliance status is not retrospective. Any person dealing with the overseas entity in the non-compliance period will be unable to register any completed transaction with the land registries. I know that all Members will join me in wanting to ensure the robustness of the register and ensure that overseas entities comply with their duties, or face tough restrictions. The clause will help Companies House to do so.

Section 27 of the ECTE Act allows the registrar to require an overseas entity to resolve an inconsistency in information delivered to her where it appears to be inconsistent with other information on the register of overseas entities. New clause 19 amends section 27, so that the registrar may use any information she possesses, not only that published on the register, to require an overseas entity to resolve a suspected inconsistency. That will strengthen her ability to ensure that the register is accurate and reliable.

Government new clause 20 mirrors amendments made in the Bill to equivalent sections in the Companies Act 2006 to ensure consistency between the Act and this Bill when it becomes an Act, and to enhance the registrar’s power to remove material from the register, which is limited under section 28 of the ECTE Act. She can only remove from the register information where there was a power but no duty to include it, or where it no longer appears reasonably necessary for the purposes for which the material was delivered to the registrar.

Proposed new section 28 will ensure that material that is unnecessary or does not meet proper delivery requirements can be removed at the discretion of the registrar, either unilaterally or upon application. The Secretary of State will also have the power to specify what sort of material can be removed from the register upon application, so that the scope of material eligible for removal can be modified in line with future operational needs. Under proposed new section 28A, the Secretary of State must make regulations that set out what notice the registrar should give when unilaterally removing information, and the processes to be followed in determining applications for removal.

The clause strengthens the registrar’s powers and ensures that she has all the necessary tools at her disposal to clean up the register of overseas entities proactively. The clause also allows the Secretary of State to amend the ECTE Act to apply any changes that part 1 of the Bill may make to corresponding provisions in the Companies Act. The ECTE Act contains a number of provisions that correspond to those in the Companies Act. Given the number of changes that part 1 of the Bill makes to the Companies Act, the clause is necessary to ensure that accuracy and consistency are maintained between the ECTE Act and the Companies Act, and the respective registers of overseas entities and of UK companies.