Third Standing Committee on Statutory Instruments, &c.


Tuesday 27 June 1995


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The Committee consisted of the following Members:


Bell, Mr. Stuart (Middlesbrough)

Bruce, Mr. Malcolm (Gordon)

Burns, Mr. Simon (Chelmsford)

Coffey, Ms Ann (Stockport)

Cunningham, Mr. Jim (Coventry, South-East)

Evans, Mr. Jonathan (Parliamentary Under-Secretary of State for Corporate and Consumer Affairs)

Goodson-Wickes, Dr. Charles (Wimbledon)

Hodge, Ms Margaret (Barking)

Lewis, Mr. Terry (Worsley)

Olner, Mr. Bill (Nuneaton)

Porter, Mr. David (Waveney)

Robinson, Mr. Mark (Somerton and Frome)

Spicer, Mr. Michael (Worcestershire, South)

Spink, Dr. Robert (Castle Point)

Steen, Mr. Anthony (South Hams)

Sutcliffe, Mr. Gerry (Bradford, South)

Thompson, Sir Donald (Calder Valley)

Whitney, Mr. Ray (Wycombe)

Mr. T. W. P. Healey, Committee Clerk

3 Third Standing Committee on Statutory Instruments, &c. Tuesday 27 June 1995


Companies (Fees) (Amendment) Regulations 1995

4.30 pm

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Jonathan Evans): I beg to move, That the Committee has considered the Companies (Fees) (Amendment) Regulations 1995 (S.I. 1995, No. 1423). It is a great pleasure to be here this afternoon, in these uneventful times, to enjoy your stimulating chairmanship, Mr. Winterton.

The Chairman: So it will prove.

Mr. Evans: Section 13 of the Deregulation and Contracting Out Act 1994 introduced a new company law procedure. It allows directors of non-trading private companies that have reached the end of their useful lives to apply for them to be struck off the register of companies and dissolved. This new procedure will come into force on 1 July for companies registered in Great Britain. A fee will need to be paid to cover the costs incurred by Companies House in processing the application. The purpose of the regulations is to prescribe that fee. To apply, directors have to fill in a simple form and send it to Companies House. They must also copy the completed form to anyone with an interest in or any dealings with the company. Unless there are good reasons why the company should not be struck off the register, it will be dissolved within a few months. The new procedure offers a simple, inexpensive and swift way for private companies that are no longer needed to terminate their affairs. They will be dissolved by relieving their directors of obligations under the Companies Act 1985 which are no longer necessary or appropriate. They will save, for example, the cost of preparing statutory accounts and, where necessary, having them audited.

Mr. Anthony Steen (South Hams): I welcome any regulation which reduces regulations, but will my hon. Friend the Minister say something about the fees which the companies will have to pay, and how many extra staff will have to be employed to implement this amendment to the regulations?

Mr. Evans: If my hon. Friend can restrain himself for just a moment, I am coming to the subject of the fee. The regulations prescribe only the fee. The procedure was contained in section 13 of the Deregulation and Contracting Out Act 1994, as I said earlier. The procedure contains certain safeguards for those dealing or involved with the company. As I have said, directors must send them copies of the application. 4 Anyone can object to the application by showing the registrar that there is good reason for the company not to be struck off. A good reason might be that the company is still trading or that a creditor is taking steps to recover a debt. In those circumstances, the application would not be granted. My hon. Friend the Member for South Hams (Mr. Steen) is absolutely right in that processing the applications involves Companies House in staff and computer costs and relevant overheads, and that that is what the regulations are geared towards dealing with. We intend to set a fee of £10 to cover all the costs of dealing with the matter. That is the purpose of the regulations. I am confident that the fee is reasonable and will not deter applicants. Therefore, I commend the regulations to the committee.

4.33 pm

Mr. Stuart Bell (Middlesbrough): May I echo the Minister in saying what a pleasure it is to serve, however briefly, under your chairmanship, Mr. Winterton? I first met you many years ago on a Tyne Tees Television programme. You were a guest speaker and I was a simple prospective parliamentary candidate. I did not get a word in edgeways then and I do not expect to get a word in edgeways now. I thank the hon. Member for South Hams for intervening on our behalf and holding the Minister accountable on the question of fees. We have had lengthy debate on the contractorisation of Companies House and its ancillary services. The Minister made a brief but cogent summary of what the regulations are about. We welcome the £10 figure, which could hardly be said to be excessive in this day and age. I have no hesitation in commending the regulations to the Committee, which I shall not divide with the serried ranks that I have behind me.

4.35 pm

Mr. Steen: I get the feeling that colleagues on both sides of the Committee do not want me to make a major speech. For that reason, I shall contain myself and ask my hon. Friend the Minister—I have a high regard for him and his deregulation zeal, which I support, is well known—about two matters that I want to be made clear. The regulations will impact on the operation of companies. Their sole aim is to minimise the difficulties that companies have in striking themselves off the register. Will my hon. Friend explain whether there have been obstacles to date? Are the regulations, which are a deregulatory measure, necessary? Is there a problem and, if so, on what scale? Whether the regulations are necessary or not, as I understand it statutory instruments are merely a formality in the democratic process and none of us on either side of the Committee can do anything about them. Once they come to the House of Commons all we can do is vote against them en masse; then they go to the Floor of the House to be passed anyway. This debate is merely window-dressing so that it can be said that measures have been through Parliament. In fact, nothing of the sort has happened. Officials come up with such schemes, Ministers speak to them and members of 5 Committees can do nothing about changing them. Is that the case? If so, it would be pointless to ask more questions, because whatever one asks would be pointless and the Minister's answers would be equally pointless. Will my hon. Friend the Minister say whether this is just part of the democratic process and that, in fact, we can do nothing to change the regulations in any way, whether we like it or not? This is just a good bit of window-dressing, which we are carrying out extremely well. Will he also assure me on my earlier point?

Mr. Jonathan Evans rose—

The Chairman: Order. Unless the Minister is seeking to intervene in the hon. Gentleman's speech, I must call the hon. Member for Nuneaton (Mr. Olner).

4.37 pm

Mr. Bill Olner (Nuneaton): Thank you, Mr. Winterton. I, too, can say that I am glad to be in Committee. I can remember you when neither of us were Members of this illustrious House, but both served Warwickshire. I hope that we were of benefit to it. The previous contribution came from the hon. Member for South Hams. I would have thought that Conservative Members knew a little more about choice and diversity at the moment than do Labour Members. The object of the Committee's sitting is to examine the regulations and to ask the Minister certain questions about them. If he was concerned, as the hon. Member for South Hams has suggested, he would take them back for reconsideration. I am sure that the Minister is not a prisoner of his officials. I am a little concerned about cross-referencing. What cross-referencing would take place in the Department of private firms that have been struck off before they paid the £10? I am anxious that within the labyrinth of Companies House someone might say, "Here's £10. Please strike us off the register." Having been struck off, such a person may have left creditors in a vulnerable position. I would like the Minister to go through the safeguards for creditors and to tell us what cross-referencing will be done before companies are struck off.

The Chairman: Before I call the Minister to reply, I am grateful to the hon. Member for Middlesbrough (Mr. Bell) for telling me that he has to depart for an important occasion. I am sure that the Committee will understand if he now leaves us.

4.39 pm

Mr. Jonathan Evans: May I begin by explaining again that the regulations that we are considering today set the theme for the operation of this procedure. As I said at the beginning of my remarks, section 13 of the Deregulation and Contracting Out Act 1994 set up the procedure of allowing companies to apply to be struck off the register. Today, we are concerned merely with setting the specific theme. I shall deal first with the points raised by my hon. Friend the Member for South Hams, who has made himself the champion of deregulation in the United Kingdom. I sometimes have difficulty in conveying to my hon. Friend, because of his missionary zeal on this 6 subject, that it is sometimes necessary to make a regulation to remove the burdens on business. Not every regulation that is made in this House increases the burdens on business. The provision contained in the regulations, which was provided for in the Deregulation and Contracting Out Act 1994, was included in the Act in order to create a deregulatory mechanism. Currently, private companies have to prepare statutory accounts and have them audited and presented on an annual basis. There may well be members of the Committee who, from time to time, have received expressions of concern from their constituents about sets of accounts that have been filed late or other things of that nature. Statutory late penalties are then imposed. That is the current status of the legislation. As a result of the concerns that have been raised over a long period of time, the procedure under section 13 of the Deregulation and Contracting Out Act 1994 was agreed and debated at some length in the Committee that considered the Bill. The regulations that we deal with today set the fee for that. My hon. Friend the Member for South Hams has asked me to tell him how many applications there are likely to be. He will be delighted to hear that the Department of Trade and Industry is not such a regulatory body that it is in a position to know exactly what is likely to be the response of business or those who currently have interests in private companies. However, we have assessed what will he the likely cost in staff terms of processing a particular number of applications. For that reason, we have estimated that an appropriate fee at this time is £10. I know that my hon. Friend is particularly concerned about not placing additional burdens on business, but I hope that following that outline he will greet the regulation as the completion of a whole deregulatory approach. I hope to see him, in due course, hailing it because I know that he is anxious to look for deregulatory successes.

Mr. Steen: I do not want to repeat what my hon. Friend the Minister has just said, but I ask him how many private companies have applied. Are we talking about tens of thousands or are we talking only of a few? What motive has driven this deregulatory measure? Is it demand, or is it just an idea?

The Chairman: I call Mr. Evans. I am giving the civil servants an opportunity to provide the Minister with an answer, which is now forthcoming.

Mr. Evans: Thank you. I was not wrong, Mr. Winterton, in saying that your Chairmanship would be stimulating. The procedure will come into operation on 1 July. In those circumstances, I am not in a position to say at this stage how many applications there are likely to be. However, I can say that the derivation of section 13 of the Deregulation and Contracting Out Act 1994 is that a considerable number of representations have been made to the Government over a long period.

Mr. Olner: Will the Minister give way?

Mr. Evans: I will not give way now. I shall dispose of this point and then I will be happy to give way. A number of representations have been made to the Government. The Committee will be aware that as part of 7 the deregulation initiative, there has been a broad range of dialogue with a number of business interests. Section 13 of the Deregulation and Contracting Out Act particularly reflected the concerns of business that a number of companies at the end of their useful life wished to be removed from the register and that the procedures that I outlined placed an additional regulatory burden on them. That is the derivation of section 13 of the Act.

Mr. Olner: For the record, can the Minister quantify the representations that he received? Does the figure run into tens, hundreds or thousands?

Mr. Evans: I am loath to be drawn into a debate about section 13 of the Deregulation and Contracting Out Act 1994. There were sufficient representations to persuade the Government that a specific deregulatory measure needed to be introduced. We put that proposal to the House, and that led to legislation. The regulations that we are discussing simply fix a fee. I shall try to deal with the fair points that the hon. Member for Nuneaton made. He asked about the position of Companies House if an application were made. Any company that wants to use the procedure cannot change its name or trade in the three months before it makes the application and up to the time of striking off. If an 8 application is made prematurely, the directors will have to withdraw it. Once the application is made, copies must be sent to directors who have not signed it, all shareholders, creditors, employees, and pension funds. Those people can object to striking off. If there is any suggestion of misuse, directors can be convicted of a criminal offence, which carries the possibility of seven years' imprisonment. That shows that substantial safeguards were attached to the Deregulation and Contracting Out Act 1994. They were debated at length in Committee, where the Opposition's anxieties were fully tackled. I return to the thrust of the regulations that we are discussing. The procedure comes into force on 1 July. The Government have to assess what constitutes an appropriate fee. We believe that it should be £10. I am grateful to my hon. Friend the Member for South Hams for stating that he did not consider that to be too onerous, when compared with the benefits that would flow from taking advantage of the application procedure. I commend the regulations to the Committee.

Question put and agreed to.

Resolved, That the Committee has considered the Companies (Fees) (Amendment) Regulations 1995 (S.I. 1995, No. 1423).

Committee rose at thirteen minutes to Five o'clock.


Winterton, Mr. Nicholas (Chairman)

Bell, Mr.

Burns, Mr.

Coffey, Ms

Evans, Mr. Jonathan

Goodson-Wickes, Dr.

Olner, Mr.

Porter, Mr. David

Robinson, Mr. Mark

Spicer, Mr. Michael

Spink, Dr.

Steen, Mr.

Whitney, Mr.