Seema Malhotra
MP for Feltham and Heston · Labour (Co-op) · United Kingdom
“Public sector productivity is improving, with the latest Office for National Statistics figures showing output continuing to grow faster than inputs, and Departments being challenged to improve efficiency and modernise outdated processes.”
“I was proud to support the Feltham Convening Partnership’s young leaders summer programme last month. What struck me was their ambition for themselves and their community, as well as their call for more work experience opportunities.”
“We will be working to commence the socioeconomic duty on public bodies in section 1 of the Equality Act to require public authorities to put addressing socioeconomic disadvantage at the heart of their strategic decision making. There will be more on that to follow. Let me again thank my hon.”
“For generations, the message to those who want to enter public life or elite professions has been that if they want to get on, they must sound like everybody else. When Margaret Thatcher became leader of her party in the 1970s, she famously underwent intensive elocution lessons with a tutor from the National Theatre.”
“Whether a young person chooses a degree or a trade, their journey must be determined by merit and their potential—never by whether they have to change their voice or pretend to be someone else to fit in.”
“Interestingly, studies also regularly show that regional accents such as Welsh or Yorkshire are rated by the public as trustworthy, warm and honest. Yet when those same studies measure perceived intelligence or employability, standard southern English and received pronunciation invariably top the metrics.”
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“One common argument against companies providing shareholder names annually is that it would prove too onerous a task for UK companies, but in answer to a written parliamentary question that I tabled his predecessor outlined that the average number of shareholders in UK companies in 2021-22 was only 2.15. The average number of directors was 1.59, so the number of shareholders was not that much higher. To argue that it would be onerous for the majority of companies to provide shareholder information does not seem so credible when set against the low average number of shareholders by comparison with company directors, as set out in the Government’s own data. I urge the Government to consider this important amendment and hope the Minister will respond positively on how we might move forward with the sentiments and arguments behind it.”
“The data provided by Savaro Ltd gives an insight into the poor quality of shareholder information held at Companies House and how that hinders investigation. Transparency International highlighted how, to identify the shareholders, it had to go back to 2015 for documents that named Status Grand as the sole owner. Instead of identifying shareholders annually, companies only have to say that no shareholders have changed. The information is hidden in PDF documents, so it is unnecessarily time-consuming to establish who held shares in an entity at a particular point in time. Savaro is a clear example of how annual shareholder data, which the amendment would provide for, could assist considerably in investigating even criminal activity in UK companies. Let me pre-empt the Minister’s pushing back on the amendment.”
“The amendment would provide that the confirmation statement about the company membership under this clause is submitted not only on a one-off basis but annually. The principle of shareholder information being submitted is one we support fully. If the Government believe that should be a one-off, I would be grateful if the Minister could explain why it need not be annual. As I have mentioned, opaque shareholder ownership is a significant barrier to ensuring transparency and tackling economic crime. An example that has been cited already is Savaro Ltd. In August 2020, tonnes of ammonium nitrate exploded in Beirut port, killing more than 200 and wounding thousands more. The reported owner of the chemicals was a UK-registered private limited company called Savaro Ltd.”
“I beg to move amendment 104, in clause 49, page 34, line 32, after “time” insert “and annually thereafter”. This amendment would require a confirmation statement with company membership information as set out in clause 49 subsection 2 to be submitted annually. The clause requires a company to provide a full list of shareholders when the first confirmation statement is filed after clause 44(3) comes into force. As I said, the clause is a welcome step in increasing the transparency of shareholder ownership and information, which we support strongly. Nevertheless, as has been said, the provisions in the Bill on shareholder information could and should go further. That is the context in which we tabled the amendment.”
“I thank the Minister for his comments and his recognition of the important sentiments behind the amendment, which I will withdraw. I think some of the measures he outlined regarding the format of the information on Companies House and searchability will go a long way to addressing the point. I hope that we will be able to continue a dialogue on that, perhaps under his guidance about how we can best engage, to ensure that what is published is searchable and meets the important sentiments of transparency, so that frankly we never have another Savaro Ltd. I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn. Question proposed, That the clause stand part of the Bill.”
“I have no further points to add. Question put and agreed to. Clause 49 accordingly ordered to stand part of the Bill. Clause 50 Abolition of local registers etc Question proposed, That the clause stand part of the Bill.”
“May I ask your advice on procedure, Mr Robertson? Should I speak now on clause 50, the amendments and schedule 2, or should the SNP amendments be moved first?”
“The point is that we have reached a place where our eyes are wide open now—or definitely wider, if not open completely. Some of the wider comments and contributions to the Government’s consultation may well be worth going back to, in the light of what other countries do seemingly without impeding their economy or their companies’ activities. India is a good example of a nation whose trade is growing and that has a real focus on both domestic growth and international trade. I worry that we are closing down some of these debates, when this is a time to review them, perhaps with a slightly more open mind.”
“The AAT noted that there was a cap of 15 in Ireland, a general cap of 20 in India, and a cap of five in France that applies to public companies only. Bodies that responded to the Government’s consultation made other interesting comments. There was a wide range of views on the cap, from two to 100 I think, with many suggesting between 15 and 25. This is an important conversation in the light of the scale and nature of economic crime, how it is changing, and the scale of abuse of our company structures. Some action has been undertaken in slightly different contexts, with less clarity about what has been happening with Russian money, Russian oligarchs and the connection to our international security. This year has really helped to challenge and expose much of that, albeit six years after legislation on economic crime was first promised.”
“There are some questions about how we might interpret some of the responses, given the number of respondents and how many responded to all the questions. In the light of that, I will make a few other remarks. The Association of Accounting Technicians, a registered charity based in London that acts as a professional body for accounting technicians worldwide, echoes Mr Browder’s assessment. In September 2020, it published an article recommending a cap of 15 directorships for one person, but it recognised, I think as we all do, that it is a difficult balancing act. We do not want to stop legitimate, lawful and productive activity, but we want to have a way of putting a stop to mechanisms that are easy to abuse.”
“74, Q151.] A limit on the number of directorships could easily be set in legislation and that would not stop people conducting their lawful business, but it would make it harder for criminals to use the system and our company structures to launder money and act as drivers of economic crime. It is worth reflecting on the fact that the evidence for that change came from a range of professional bodies. They also said that if they were directors of four, five, six or seven companies, how would they have the time to undertake their responsibilities with the required due care? The Minister referred to the consultation on this issue and said that three out of four of those consulted opposed a cap. Can he give us clarification on the year of that consultation?”
“From our evidence sessions and debates in Committee, we have learned that individuals with multiple directorships are a massive red flag in terms of potential criminal activity. In evidence to us on 27 October, Bill Browder said: “Why is it okay to have a person be a director of 400 companies? That does not make any sense to me. Why should there not be some limitation—maybe 10? Ten companies is a lot of companies—but 400 companies, or a thousand companies?” –– [ Official Report, Economic Crime and Corporate Transparency Public Bill Committee, 25 October 2022; c.”
“Amendment 68 would limit the number of directorships that one individual may hold. Where notice has been given to the registrar that a person has become a director, the registrar may determine that they should not hold that position, if the registrar considers that they hold an excessive number of directorships. That may be achieved by setting a cap on the number of directorships held and it might be possible to override that limit if there were good reason, and a simple means introduced by which that application and argument could be made to the registrar. Such a proposal could be implemented sensibly to bring about the benefits that it offers, especially in the light of some of the abuses committed.”
“Thank you, Mr Robertson. The importance of clause 50, which relates to schedule 2, is obvious and requires no further comment. The Minister’s description of schedule 2 as long and detailed was on the button. Its length is understandable given the changes it is making by abolishing the requirement for companies to maintain their own registers of directors, registers of directors’ residential addresses, registers of secretaries and registers of people with significant control. Instead, that information will be held centrally by the registrar, with the important provision that companies have a duty to update the registrar of any change to the information. We welcome the proposed changes in clause 50, but I want to comment on amendments on 68, 69 and 70 tabled by my SNP colleagues, to which I am sure they will speak.”
“We support the spirit of the amendments, but I refer the Committee to our amendments 102 and 103, which we will be speaking to in later debates. Our amendments take a slightly different approach and place a duty on the registrar to give every director a unique identification number, which is published on the registrar’s website. I think that approach is tighter. I hope in his response that the Minister will be clear about what the registrar is required to do versus what they can do, and what will be and will not be published on the unique identifiers for directors.”
“We are saying that, as the logic of the SNP amendment outlines, rather than managing on a case-by-case basis, having a way to manage risk structurally and procedurally is an important response to the evidence, the nature of use that we have seen and the situation we find ourselves in today. There is room to learn from the experience of other countries. Amendment 69 would insert a provision into schedule 2, requiring that: “On receipt of notification of a person becoming a director, the registrar must allocate that director a unique identification number, unless such a number has already been allocated to that person.” Amendment 70 follows from that, and would provide penalties for anyone failing to provide their unique identification number to the registrar.”
“If the Minister is saying that there might be a level at which there starts to be a red flag, and implicitly that Companies House may implement the legislation, perhaps Companies House and the registrar will say, “Maybe we’ll just do a procedural check if we have 25-plus directorships.” I do not know. That is where data and analytics help, rather than a ballpark figure. It must be within a considered understanding of how our economy works, and how and where legitimate business is carried out, with a view from directors as well. We might find that it is an easier answer to reach, because it does not have to be one that only we, as Members of Parliament, comment on; it has to be informed. We are not arguing for a hard cap.”
“The Minister asks a fair question. He is not necessarily stating a cap. Given what has come out in the consultation, and what has been in the articles about whether there should be a cap and what would be right for British companies, it is certainly open to further conversation. It is interesting that in the Government’s consultation many were suggesting between 15 and 25, which is in the ballpark of what has been happening in other countries. The make-up of our economy could be slightly different. We have to understand it in the round, and in the context of our economy, but it is a question of a scale of 400 to 1,000.”
“The hon. Lady is making a powerful argument. The Minister asked her what she thought was not sufficient about clause 66. Does she agree that arguing for a unique identifier is about ensuring that it actually happens? The wording of proposed new paragraph (d) in clause 66(2)(c) is to “confer power on the registrar…to give a person a new unique identifier”. It is a power, rather than a duty. That seems to be at the heart of the disagreement—is it a power or is it a duty?”
“As the Minister mentioned, the clause amends the Companies Act in relation to individuals’ dates of birth and when they can be restricted from disclosure. The measures are important for occasions when the disclosure of someone’s date of birth would be inappropriate or unnecessary, so we support the clause. Question put and agreed to. Clause 51 accordingly ordered to stand part of the Bill. Clause 52 Filing obligations of micro-entities Question proposed , That the clause stand part of the Bill.”
“We welcome clause 56 as a necessary provision for improving the accuracy of information in relation to small companies.”
“Is there likely to be any review of those thresholds? Perhaps the Minister can enlighten me as to whether there is clear demand for that. In the light of current circumstances—the clamping down on, and growth in, economic crime, as well as the transformations we will have seen in the last six, eight or 10 years—will the Minister tell us whether the high thresholds brought in by the Government have reduced audits and the transparency of information on the register? Have they affected the extent to which information filed by companies is trusted? Is the Minister interested in considering whether the levels for audit exemption are acceptable and right in the context of current economic crime, or does he think, in the light of the opportunities presented by the Bill, that there is reason to look at any of that again?”
“When a company seeks an exemption from the requirement to have its accounts audited—for example, because it is a small company with £10 million or less in turnover—the clause would require directors to make a statement confirming that the company qualifies for an exemption. I would appreciate it if, in the interest of the robustness of legislation, the Minister would expand on the clause and clarify what qualifies a company to have an exemption in that regard. The Government brought in an increase in audit exemption levels, effectively making more companies eligible for exemptions, and that goes back to the 2013 EU accounting directive, which sought to simplify requirements on companies submitting accounts and gave member states the flexibility to increase the small company accounting and audit exemption thresholds.”
“The Secretary of State may make a determination later about when to bring the requirements into force, but perhaps the Minister will indicate today when he expects the Government will want the new requirements on micro-entities to become operational. We welcome clause 52 as a necessary means to ensure that small businesses that are not micro-entities file full accounts to the registrar—which, again, will increase transparency and the availability of information. Clause 54’s consequential amendments seek to ensure that clauses 52 and 53 function as intended. I want to make a few comments on clause 55. Perhaps the Minister can clarify the exemptions from audit requirements under this clause.”
“However, that raises the important question of whether any further work might be needed on micro-entities, although that question is for another debate. On roll-out time, the Bill’s impact assessment suggests on page 76 that familiarisation time will be needed to get micro-entities up to speed with the changes, but there should not be significant additional costs, as companies already collect and submit additional information to HMRC in tax filings. In the light of what we and the Minister have said, we want moves that stop the criminal behaviour, but do not impede ordinary, good, productive and lawful business, so the measures are welcome. We want to see them come into force as soon as is practicable.”
“We welcome clause 52 as a reflection of the fact that insufficient information is filed from those micro-entities to give a true and fair view of their financial position. The minimal disclosure requirements at present have also made them attractive to fraudsters who want to present a false picture. There were 1.3 million micro-entity accounts filed in 2019-20. It is the most common choice for account filings. The Government’s December 2020 consultation on improving the quality and value of financial information on the register noted: “Fraud investigation bodies have reported that micro-entity accounts are often used by companies that are investigated in money laundering cases.” It is therefore absolutely right to tighten things up and seek greater transparency in the accounts and financial positions of companies’ activities.”
“I thank the Minister for his comments. We welcome the measures in these clauses. As the Minister said, clause 52 updates the filing requirements for micro-entities. A company is a micro-entity if it has any two of the following criteria: a turnover of £632,000 or less, a balance sheet of £316,000 or less, or 10 or fewer employees. The technical definition of a small company is any company that has any two of the following criteria: a turnover of £10.2 million or less, a turnover of £5.1 million or less, and 50 employees or less. Although we use the terms micro and small entities—in terms of the scale and size of other companies, that is significant—they can be larger than the terms indicate. That increased transparency from clause 52 is important.”
“I think we all agree that we do not want to do things that impede lawful activity—that is not a matter for debate, really. The question is whether the systems will be strong enough. They do not have to be burdensome; there are ways in which systems can have automatic checks, and be underpinned by clear roles and responsibilities. The question of who would know whether there are errors in a confirmation statement, and how that would be checked, is quite an important one for ensuring that we are not—”
“It would also be helpful to understand whether the Bill will allow for retrospective penalties, should information on the confirmation statements turn out to be misleading, and perhaps purposefully misleading.”
“I hope that the Minister recognises that I am putting these comments and questions to him in the hope of detecting ways of tightening up the message about what we expect, in order to better implement the Bill and its stated goals. We welcome clause 59, which I think we referred to earlier. Clause 60 will align terminology around existing offences relating to confirmation statements. The Minister outlined the detail of that. I raise a similar question as previously, because I seek clarity from him on what it will mean in practice for companies that breach the new provisions around confirmation statements. What is the result of failure to comply with the provisions, and who will be held to account? Clarifying that would be quite helpful.”
“We should be clearer about what steps should be taken on detection, prevention and enforcement, and ensure that that is as strong as possible through the passage of the Bill. That is incredibly important, because we know that those are weak areas. My right hon. Friend the Member for Birmingham, Hodge Hill made the very important point that we need to clarify what is expected of the registrar. They will be subject to many different demands, and in some ways it will make their life easier if they see in Hansard that there is a clear expectation from the Government, the Minister and the House about what is to be done. That would aid the call for greater resources, as it is frankly a way of making savings from enforcement later, and increasing the speed of detection will considerably lower the cost of economic crime.”
“We welcome clause 57 which, as the Minister said, prescribes the company’s duty to notify the registrar about certain events and provide certain information in advance of and at the same time as the delivery of the annual confirmation statement. That is obviously very important. We have already debated some of the issues that clause 58 addresses. It is obviously an important clause, and the Minister has outlined that the approach is to hope for accuracy, based on risk assessments and red flags. We understand that, but it still does not feel as strong as we need it to be. It does not feel clear and strong on detecting issues, and it does not give the registrar a clear expectation of what the Minister intends. It felt a little like the Minister was just hoping that everything would work out.”
“I understand what the Minister says in relation to GPG 45. I wonder whether he has considered that, in circumstances where an identity document with a photograph of the individual’s face may not be available, for whatever reason, in some way having a photograph of the person’s face is the most important thing. Is that something he has considered as part of verification checks?”
“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—”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“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?”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”