COMPANIES (FEES) REGULATIONS 1975 (Hansard, 24 March 1975)

§ Lord WINTERBOTTOM
My Lords, I beg to move that the Draft Companies (Fees) Regulations 1975, laid before the House on 10th March, be approved. As many Members of this House will be aware, there is frequent complaint that the records of individual companies which are open to inspection at Companies' House are not up to date. This situation arises from a number of causes, some of which can only be rectified by major legislation which the Government hope to place before Parliament next Session. As to the remainder, strenuous efforts have been made in recent years to effect an improvement. Extra staff have been provided, computerisation of some records has now been completed, the staff have worked up to 100,000 hours overtime a year, and as a result the situation is greatly improved. There remains, however, a problem which was recognised as long ago as 1962, in the Report of the Company Law Committee, commonly known as the Jenkins Committee. The number of companies on the register continues to grow year by year; for example, from 530,000 at the end of 1968 to nearly 630,000 at the end of 1974, and it is now nearly 640,000.
In addition to the companies which are in course of removal, this includes a number which are moribund, have long been inactive, are only marginally viable or are there purely for name protection purposes. Many such companies are included among those to whom the Registrar is forced to send a succession of reminder letters calling attention to defaults in filing statutory returns. Such default action occupies some 110 staff, together with an expensive computer operation, and during 1974 involved the dispatch of half a million reminder letters.
To cope with the problem the Jenkins Committee recommended in 1962 the imposition of an annual registration fee at a level which was—and I hope noble Lords will not laugh—moderately large, say £5. This recommendation was made in the hope that it would lead to the removal from the register of moribund companies, freeing space in the Registrar's office and company names for others. 1079 The new registration fee, payable on forwarding to the Registrar the statutory copy of each company's annual return, was set in the Companies Act 1967 at £3. From the figures I have already quoted, it is obvious that it has failed to achieve its objectives. In these circumstances the Government have decided that action must be taken to discourage the retention on the register of companies which arc not active and have no reasonable prospects of becoming so.
The Order now before this House seeks to raise the annual fee from its present level of £3 to £20. I recognise that no additional burden is ever welcome. I am bound to say, however, that, although this increase is substantial when expressed as a percentage, this is not in practice the realistic way of looking at the position. The additional cost in money terms will be £17 per annum and this must be considered in the context of its being the only fee which the company must pay to the Registrar after its incorporation.
The other fee, payable by foreign registered companies who establish a place of business here, is very comparable to that I have described. These two fees have previously run in parallel and it would be inequitable for them not to continue to do so. The proposals should be of considerable value in helping to maintain the efficiency of the Companies Registration Office, to the advantage of all who make use of its service and in general to the commercial life of this country. I commend the Motion to the House on these grounds, and I beg to move.

§ Lord LYELL
My Lords. I should first like to thank the noble Lord for the courteous and concise way in which he set out the somewhat complicated schedule of registration. The only comment I would make is on the increase in the lodging fee for the annual return to the Registrar. The noble Lord mentioned the words "moderately large" and he has given a very full explanation of the increase from £3 to £20. In this supposedly modern era, such an increase should not be seen as too great. However, it hardly seems 1080 justified on the grounds of inflation, and a doubt arises as to whether such a method should be used first to prevent the files in Companies House from becoming too large. I am thinking particularly of the small company which would like to make use of limited liability, and might wish to invite participation by relatives and friends, or even by outsiders. In the case of a small company, this is a considerable imposition in addition to the £50 fee for registration. We have heard from the noble Lord about the continual rise in costs at Companies House and, with that in mind, perhaps one should not object too strongly to this increase.

§ Lord WINTERBOTTOM
My Lords, I am grateful to the noble Lord, Lord Lyell, for the way in which he has accepted my proposal. I quite agree that the size of the Register is not really the issue. It is the moribund companies that the Government really wish to shake out, because they waste time, money and so on. I quite agree that there are small companies which serve a useful purpose— namely, the safeguarding of the name of a company which might be useful in the future. But in the present circumstances I do not think the fee proposed would necessarily prohibit the continuance in existence of a company with a valid purpose. After all, £20 is not a great deal in these inflationary days. Originally, £5 was quite a lot, but in these days it does not go as far as it once did.
There is another factor. I think the whole House would agree that the Government's general attitude that costs should be covered in every operation is correct. To take the year before last and the year previous to that, the Register was in the black to the extent of about £180,000. Last year it was in the red by approximately £600,000, and in the present year—unless these charges are put into effect—it will be in the red for the extent of about £2 million. In circumstances where every loss must be avoided if possible, it is necessary to make the increase sufficient to meet the deficit and at the same time possibly to cover inflation, which I am afraid we shall not see stemmed for a year or two. It is for this reason that the fee has been fixed at the level I have explained.