Company Law Bill [HL]

Clause 605 concerns entries on the register of interests disclosed under Clause 590 and provides that incorrect entries may be removed from the register. The clause re-enacts Section 217 of the 1985 Act, but removes the existing requirement for the company to verify information relating to third parties supplied in response to a company’s notice requiring information about interests in its shares. Amendments Nos. A127A and A128 would reinsert that requirement, as has been explained. However, the Government are aware that the requirement on the company to notify third parties that they have been named as being interested in shares in the company places an onerous burden on companies. The Registrar of Companies has provided estimates that the current Section 217 provision requires some 2 million letters to be sent at an annual cost to companies of £1 million to £2 million per annum. The very large number of Section 217 notices sent out to third parties only rarely produces any responses objecting to an incorrect entry. Accordingly, the Government have concluded that the burden on companies is disproportionate to the benefit to third parties afforded by this requirement. We have, however, retained the protection in subsection (2) that if the third party becomes aware by some other means that his or her name incorrectly appears on the register, he or she can apply to the company to have it removed. On Amendments Nos. A129 to A131, I fear that allowing the correction of the register may, paradoxically, risk undermining its accuracy rather than improving it. At present, if a company removes a third party’s incorrect entry from its register, it can simply send a notice under Clause 590 requesting the full accurate information. That notice and the response will then be subject to the full set of requirements and sanctions in Clauses 590 to 592 which ensure the accuracy of the response. Allowing the company to correct the register if satisfied by information provided voluntarily by a third party and not subject to these requirements and sanctions could lead to the inclusion of less accurate information on the register.