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Company Law Reform Bill [HL]

These amendments—based, I understand, on helpful comments made by the Law Society—raise two issues. What should the law be? And, once one has decided what the law should be, does the Bill set out the position sufficiently clearly so as to give certainty to users? The situation we are discussing is where a company has submitted information which is in some way imperfect to the registrar, and then is required to correct that information. The question is: should the date of receipt of the information for legal purposes be the date on which the original was submitted or the date of the corrected, replacement version? This is not a straightforward issue and, I admit, we have had to think hard about it. On the one hand, there will be instances where companies submit information which is wrong only in, so to speak, a minor way—for example, there may be a small and inadvertent gap in the information, perhaps the lack of one name or signature amongst a series. At the other extreme, there could be instances where a company quite negligently submits information which is so wrong as to make no sense, or deliberately chooses to leave information incomplete in order to buy itself time when it is not yet ready to comply with the underlying obligation, in the hope that, by the time the error has been spotted and the company is asked to make the correction, it will be ready to do so. If there were some easy way to distinguish between the trivial and innocent omissions and inaccuracies on the one hand, and significant and culpable ones on the other, then it would be tempting to write such a distinction into the law to ensure that in the former circumstances companies were given, so to speak, a ““time credit””—in other words, a period of grace to correct the record—and in the latter case they were not. But, frankly, such a distinction is not easy to make. I do not think it would ever be possible to construct a definition which was clear and hard-and-fast in all circumstances. Introducing some less precise formulation would almost inevitably create anomalies. Ultimately, I think we must keep in mind the crucial importance of ensuring that companies provide prompt and accurate information which will appear on the public register. This is important to other companies in their capacity as users of the information. Any measures which enable companies to submit information knowing that they would then have a second chance to correct it, and that there would be no adverse consequence to them in getting it wrong first time, would seem to me to be unhelpful in this regard. I also think it would be unhelpful to provide, as these amendments would, that different but related provisions in the Bill should be subject to different approaches, with time credits being available under Clause 704 but not under Clause 688. For these reasons, we prefer to maintain the principle across the board that there should be no time credits. Finally, there is the question of whether the Bill is sufficiently clear. I think it is. I accept that the draft clause which the Government published over the summer may have suggested a different treatment of this issue in some circumstances, but I hope that I have been able to set out the Government’s policy clearly today. I do not think there is anything in the Bill as it is now drafted which would indicate any doubt as to the approach. A question was raised about Clause 685. The underlying policy is the same in the informal corrections provisions as it is in the clause we have been discussing. In essence, we believe that companies must deliver the right information at the right time. I believe it is sensible to set out expressly that no time credit is involved in Clause 685. We are dealing there with an informal mechanism and it might otherwise not be immediately obvious in legal terms how to treat the timing of information received in, say, a phone call as opposed to a formal replacement document.