Companies (Late Filing Penalties) and Limited Liability Partnerships (Filing Periods and Late Filing Penalties) Regulations 2008

– in the House of Lords at 6:22 pm on 21 February 2008.

Alert me about debates like this

Photo of Baroness Vadera Baroness Vadera Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform 6:22, 21 February 2008

rose to move, That the draft regulations laid before the House on 17 December 2007 be approved.

Photo of Baroness Vadera Baroness Vadera Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform

My Lords, this debate and those that will follow relate to our implementation of the Companies Act 2006. I begin by paying tribute to the Opposition for the constructive way in which they approached discussions in the House on that Bill and for their stamina and endurance in seeing it through to Royal Assent. We are especially grateful to the noble Lord, Lord Hodgson, the noble Baroness, Lady Noakes, and the noble Lords, Lord Sharman and Lord Razzall—some of whom are not sitting in their places—for their contributions, which benefited the legislation.

These regulations relate to the regime of civil penalties for companies and limited liability partnerships that deliver their accounts after the due date. The purpose of the regulations is to provide transparency for customers, suppliers and other stakeholders by ensuring that the UK has a complete public register of company accounts. Until the register was introduced in 1992, only 60 per cent of companies filed on time. The figure is now 84 per cent. The penalties in the regime have not changed since 1992 and have, therefore, reduced in real terms. In the past three years, we have started to see a small decline in the number of companies filing on time. So far, there has been a reduction of only half a percentage point, but in a register of more than 2 million companies that represents an extra 10,000 companies filing late each year. The purpose of the regulations is to reverse that trend. The regulations are based on the principles of the Hampton and Macrory reports on risk-based and proportionate enforcement. They focus on those who do not comply, rather than on those who do.

First, the regulations increase the basic £100 penalty to £150, reflecting inflation since 1992. Secondly, the penalties will increase in real terms for any company that files more than one month late, from £100 to £375. For a company filing just over three months late, a £250 penalty becomes £750. Thirdly, they target repeat offenders. A company that files late twice consecutively will pay double the penalty.

The draft regulations provide for the first of the changes to come into force on 1 February 2009. In the interests of simplicity, they will apply to all accounts filed after that date, whether under the Companies Act 2006 or under the transitional regime for accounts prepared under the Companies Act 1985. The repeat offender provision will apply only where both sets of late-filed accounts were filed under the 2006 Act. In practice, most companies will not be at risk of a double penalty before February 2011. That is the earliest time when a private company with a normal 12-month financial year will be able to file late twice.

In addition, the regulations align the penalty regime for limited liability partnerships with the regime for limited companies, as is the case now. Finally, they reduce the statutory filing deadline for limited liability partnerships from 10 months after the year end to nine. Again, that will apply the same rules to limited liability partnerships as will apply to private companies under the 2006 Act. The regulations follow a consultation process that concluded that, on balance, the proposal as it stands is right. I commend the regulations to the House and I beg to move.

Moved, That the draft regulations laid before the House on 17 December 2007 be approved. 6th Report from the Joint Committee on Statutory Instruments.—(Baroness Vadera.)

Photo of Lord Sharman Lord Sharman Spokesperson in the Lords, Department for Business, Enterprise and Regulatory Reform

My Lords, I will not delay your Lordships long on a day when matters of significant moment have been debated. By and large, these measures are very welcome. There is a clear need to update the fines and penalties for late filing and it is absolutely right that the arrangements should apply to limited liability partnerships in the same way as they applied to limited liability companies. I was reminded that in 1999 I made my maiden speech in this House on the Second Reading of the Limited Liability Partnerships Bill. I am pleased to see that the Companies Act 2006—the noble Baroness referred to our deliberations on it, which were lengthy, I might add—has ensured that this sorely needed form of business enterprise is being widely adopted. The regulations will make them fully on a par with limited liability companies. We support the regulations.

Photo of Baroness Vadera Baroness Vadera Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform

My Lords, I am grateful to the noble Lord. I know that the penalty regime has been controversial for some, so I am grateful for his support. We will be assisting all companies to file on time by developing electronic filing of accounts.

On Question, Motion agreed to.