24 January 2023
Jonathan Djanogly backs Economic Crime and Corporate Transparency Bill

Jonathan Djanogly welcomes the Bill, much of which updates the Companies Act 2006 to recognise technological changes in business practice and increase protection against fraud, and highlights the need to provide adequate resources for the culture change needed at Companies House.

Mr Jonathan Djanogly (Huntingdon) (Con)

This is a first-rate piece of legislation, which is both timely and important in the ongoing fight against economic crime. I join many others in the House in saying that it is good to see presenting the Bill a Minister who has long engaged with these issues. There have been many excellent and important contributions during the debate.

Much of the Bill, particularly part 1, develops themes that were debated during the Companies Act 2006. That Act itself was formulated on the basis of many years of consultation. It was the right hon. Member for Barking (Dame Margaret Hodge) who took the Bill through the House. I think it was the longest Bill ever—it may still be the longest Act ever. I had the pleasure of being the shadow Department of Trade and Industry Minister at the time. We proceeded on the Bill mainly in a spirit of co-operation, as I recall, so, it is very appropriate that today, some 17 years later, we are not only co-signing amendments to develop this workstream further, but talking almost one after the other, just like old times. Today, once again, the right hon. Lady made a very important contribution. I say “workstream” because this is an area, like so many, where development of the law is required because of changes that have taken place through technology and practice, both of criminals and regulatory gaps or inaction.

For instance, in 2006, paper registers maintained by companies were the norm, particularly for small companies. People simply did not think of identification verification in the way that is now commonly accepted. Therefore, moves in the Bill, for instance to require directors and those delivering documents to have their IDs verified and to provide for registers to be held centrally, are not only better to stop fraud, but more transparent and accessible and, frankly, are now the contemporary norm.

The general mood at the time of the 2006 Act was, I would say, broadly deregulatory, which is fundamentally why the then Conservative Opposition were able to work very well with the then Labour Government on that Act. It must be said that that was well before 42% of all UK crime was fraud related, as it is now. Of course, there will always be a trade-off between absolute ease of doing business and upping levels of regulatory checks, but for the most part this Bill has got it right in improving protections against fraud while measuring the mood of business.


I would sound a cautionary note that, while this place can create as many new offences as we like, a point other hon. Members have made, if they are not enforced and resourced, nothing will happen. The Companies Act 2006 is packed with criminal offences, most of which have hardly ever been prosecuted—I would wager that many of them have never been prosecuted at all. I heard the Minister read out a list earlier of “must dos” for the role of Companies House, but without management and funding, he should not assume that it is all just going to happen.

Enforcement costs money and lack of resource has historically hindered investigation as much as prosecution. I appreciate and welcome the fact that the Government’s intention to change the role of Companies House from a plain registry to a semi-regulator is being backed up with more money, and I was interested to hear the Minister’s view earlier on new clause 20, which proposes charging a £100 incorporation fee. He was clearly open to reviewing the level of fees based on need.

The Companies Act proposal for a very low fee was to encourage global people to set up companies in the United Kingdom rather than elsewhere. I appreciate that point, but, first, the fee should have kept up with inflation and, secondly, even at £100 it would not constitute a huge sum to set up a company. Also, importantly, there are no proposals to raise the minimum capital requirements for new companies, which would present a bigger obstacle to new business formation than a reasonable fee—a fee that could go towards enforcement, as my hon. Friend the Member for West Worcestershire (Harriett Baldwin) described.

There is no doubt in my mind that the challenge facing Companies House in terms of culture change with this new legislation is not insignificant and will need some serious managing and monitoring by Ministers. New clause 16, which suggests that the Government publish an annual report on the reforms proposed by this Bill, is a good one. This is for the most part not a Bill of grand designs or massive innovation; it is moving forward on necessary protections in a measured and forensic way.

As the right hon. Member for Birmingham, Hodge Hill (Liam Byrne) said, realistically it is unlikely that the necessary tweaking will end on the day the Bill is enacted, and reviews are therefore a very good idea. Government new clause 15 is welcome recognition of that, although I am not sure why Ministers want to restrict the reports to only parts 1 and 3 of the Bill. I hope that those reports do not simply look at how we can introduce ever tighter checks. The reports should also review how checks can be done with minimum regulation and maximum efficiency to avoid red tape clogging up business. I appreciate that that is easier said than done, and will require ongoing vigilance and full consultation with practice lawyers and other practitioners.

Clause 63, providing for authorisation of corporate service providers, is novel and a significant move from existing company law. However, given the potential for mischief happening with companies being incorporated for illegal reasons, it must be the right way to go. Amendment 103 forces the registrar to carry out risk assessments to establish whether the verification of the ID by the provider

“is likely to give rise to a risk of economic crime.”

I am not sure that the wording of the amendment is perfect, but the principle seems sound if we are to have active enforcement. The idea of having unique identities for people dealing with the register will be a significant help to stopping the very real problem of impersonation and companies being hijacked by imposters. However, getting the system working will require a good push, so I will be interested to hear the Minister’s reaction to amendment 105, which would basically make such a system a duty rather than just something that could be done.

Most of the points that I make today are of what I would call the fine-tuning variety. As I have said, the nature of this worthy Bill means that more fine-tuning will be needed as we go along. An acknowledgment of that from the Minister would be appreciated.


Earlier interventions in the same debate

Mr Jonathan Djanogly (Huntingdon) (Con)

Is not the point that if someone is convicted of a criminal offence, the court automatically has the power to disqualify them, and that by not being prescriptive in legislation, we ensure that the judge in a particular case has more leeway than perhaps the hon. Lady would give him?

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

I thank the hon. Member for his intervention. Perhaps he is missing some of our argument around the central question, because it does not happen in all cases. We have not received any further information on the work and research that the Minister started during Committee on what happens with those directors, which he committed to follow up.



Mr Djanogly 

Is the point not also that if we raise the fees, rather than their falling to the general taxpayer, those who use the service would actually be paying?

Harriett Baldwin (West Worcestershire) (Con)

That is my point—my hon. Friend has made it much better than I was. This is an offer to the Minister for a significant increase in the budget of one of the agencies for which he is responsible, Companies House, and it would be feasible without putting any further burden on the hard-pressed taxpayer. That is why I support the new clause and why I am looking forward to the Minister accepting the principle of it. I acknowledge that we may be talking about plus or minus a few quid around that £100, but that is a good starting point.