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Company Law Reform Bill [HL]

moved Amendment No. A186:"Page 326, line 21, at end insert—" ““(   )   If any person suffers any loss or damage or incurs any expense as a result, direct or indirect, of a failure by the registrar to perform the registrar’s functions, the registrar shall indemnify and keep indemnified that person against all such loss, damage and expense.”” The noble Lord said: We are dealing with the registrar of companies, and the purpose of the amendment is to provide an indemnity to any person who is affected by the failure of the registrar to perform the registrar’s functions set out in the Companies Acts. Neither the existing Companies Acts nor the Bill cover the question of the liability of the registrar for mistakes made in registering information on the register. That is in notable contrast to directors and auditors. In its report on company security interests, published in 2005, the Law Commission referred to consultees’ views that in principle the registrar should be liable for losses caused by any failures that were the result of negligence by Companies House. The commission thought that this should be the subject of a comprehensive review or left to the courts. This is not just an academic issue. We know of instances where the registrar has failed to perform his or her functions, with significant consequences for the company concerned. In one case, the registrar failed to issue a certificate of re-registration of a public company as a private company, despite all the necessary documents having been delivered by the company. This went unnoticed for several years; meanwhile, the company relied on the exemptions available to small private companies in preparing its annual accounts. When the error was discovered, the company had no option but to have public company accounts prepared and audited for each of the years in which it had unwittingly remained a public company. From personal experience, I can assure the Committee that that was at considerable cost to the company. There have also been instances of the registrar failing to record registered charges in a company’s register of charges maintained under Section 401 of the Companies Act 1985. That has misled lenders to the company into thinking that the company had no registered charges, only to find that when the company went into liquidation there was a substantial lender ranking ahead of them whose debt consumed all the available assets of the company. That is the sort of cost we suggest should be covered by an express indemnity from the registrar. I beg to move.