Company Law Reform Bill [HL]

Clause 75 supplements the clauses earlier in this part on registration of names containing sensitive words, expressions and so on. Typically, companies have to contact government departments or other bodies for permission to use these words. Sometimes they have to give undertakings. Clause 75 allows the Secretary of State to direct a company to change its name if it has given misleading information or breached an undertaking. The Secretary of State rarely uses this power but that does not mean that it is an insignificant safeguard. Directions are usually given on the basis of a complaint either from the police or the body whose view was sought for the name’s approval. The question is: after what period should a company be able to retain a name even if its current activities do not justify the inclusion of a sensitive word or expression? The period has long been five years. It might well be argued that it would be in the public interest for the period to be lengthened substantially, as the reason prior approval was required in the first place was to protect the public. We recognise that there comes a time when a name is so strongly associated with the company that its independent meaning loses relevance; however, I do not think that time is reached after only three years. Making the company, and none of the directors, liable for a fine would be very hard on the members on whom ultimately the penalty will fall. The current drafting says that the directors are liable only if they are in default. I see no reason why a director who is in default should not be liable. I note the proposal that the penalty be expressed in sterling. This certainly makes it clearer—but it means that the penalty cannot be adjusted along with other financial penalties. With regard to the regime for penalties, most of the regulatory requirements associated with company law are currently enforced through criminal sanctions. The Company Law Review looked at that issue in detail and concluded that so long as it was enforced sensibly, the efficiency of the criminal sanctions regime was sufficient to overcome any misgivings about proportionality of applying these sanctions to breaches of procedural requirements. We and the great majority of consultees agree with that conclusion. Therefore, the Bill does not substantially change the sanctions regime.