Schedule 2, Part 3 - Amendments relating to investigations
165.Part 3 makes certain amendments to the Companies Acts 1985 and 1989 in respect of company investigations.
166.Paragraph 17 inserts new section 447A into the Companies Act 1985. It re-enacts previous section 447(8), (8A) and (8B) with minor drafting changes. New section 447A(1) indicates that statements made to the Secretary of State or an investigator in compliance with a requirement to provide information under section 447 can be used in evidence in legal proceedings against the maker of the statement. But the general effect of new section 447A(2) is to prevent such compulsorily required statements being used against their maker in most types of criminal proceedings (which new section 447A(2) refers to as criminal proceedings in which the maker of the statement is charged with a “relevant offence"). Such statements can, however, be used against their maker in proceedings for the three offences listed in new section 447A(3), which are not “relevant offences”. These three offences exist to deter and punish the making of false statements. They comprise the offence under section 451 of the 1985 Act of providing false information to the Secretary of State or an investigator; and the offences of making false statements otherwise than on oath under section 5 of the Perjury Act 1911 and its Scottish equivalent. It would not be possible to prosecute such offences if the false statement itself could not be used in evidence against its maker.
167.As far as the broad range of criminal proceedings is concerned (proceedings for “relevant offences”), new section 447A(2) provides exceptions to the general rule that statements made under compulsion cannot be used in evidence against their maker. So, for example, a statement can be used in this way if the defence itself seeks to rely on evidence relating to the statement.
168.Paragraph 18 replaces section 449 of the Companies Act 1985. Much of the information, including documents, obtained during the course of an investigation under section 447 of the Act is confidential. Previous section 449 recognised this by restricting its further disclosure. It was an offence under that section for any person to disclose information relating to a company which had been obtained under section 447 unless the company consented to the disclosure. However, there were circumstances where such information needed to be disclosed, for example to allow a criminal investigation to take place or to enable a regulatory or professional body to take action where some wrongdoing or irregularity had been exposed. Previous section 449(1) listed a number of purposes for which information could be disclosed and previous section 449(3) listed a number of bodies to whom it could be disclosed. Such provisions are known as “gateways”. Previous section 449(1B) and (1C) also enabled gateways to be opened by order, and as a result there was a series of orders containing further gateways.
169.The restrictions and gateways in previous section 449 also applied to documents seized under a search warrant in a section 447 investigation.
170.In addition, by virtue of previous section 451A, the gateways in section 449 applied to information obtained by inspectors appointed under Part 14 of the Companies Act 1985, so that the Secretary of State could disclose, or require or authorise an inspector to disclose, such information to a person or for a purpose permitted under previous section 449. They also applied, in a similar way, to information obtained by the Secretary of State in an investigation of share ownership under section 444.
171.In substituting section 449, paragraph 18 has three main purposes:
to consolidate the many amendments which have been made to section 449 since its enactment and to put the various gateways currently provided for by order on the face of the legislation;
to provide for a small number of new gateways, in particular a gateway for the Regulator of Community Interest Companies and a gateway for a body appointed under section 14 of the present Act; and
to apply the restrictions on disclosure and gateways to information obtained by the Secretary of State under new section 448A and to information obtained during a visit to premises by investigators under new section 453A.
172.New section 449(1) applies the disclosure restrictions and gateways to information obtained by the Secretary of State or an investigator exercising powers under new section 447, information volunteered to the Secretary of State under new section 448A and information obtained by investigators during a visit to premises under new section 453A (for example, things the investigators have learned by seeing how the company operates). It also applies the disclosure restrictions and gateways to information obtained by any person accompanying an investigator during a visit to premises under new section 453A. However, because of new section 449(9), the disclosure restrictions do not apply to information which already is, or has been, made available to the public.
173.New section 449(2) prohibits the disclosure of any of this information other than to a person specified in new Schedule 15C to the Companies Act 1985 or in any circumstances described in new Schedule 15D to the Act. In other words, these new Schedules provide for the gateways. The new Schedules are inserted by paragraph 25 of Schedule 2.
174.Disclosure is no longer permitted solely because the company to which the information relates has consented.
175.New section 449(6) provides that to disclose information other than through a gateway is (as previously) an offence. The Act makes no change to the penalty except that it raises the maximum term of imprisonment on summary conviction in England and Wales from 6 months to 12 months (see section 25 and Schedule 2, Part 3, paragraph 26(2)).
176.New section 449(3), (4) and (5) contains a qualified power to amend the two new Schedules by statutory instrument allowing the Secretary of State to open new gateways and make changes to existing gateways.
177.The restrictions and gateways in new section 449 and new Schedules 15C and 15D also apply (by virtue of section 448(8)) to documents seized under a search warrant in a section 447 investigation.
178.Paragraph 19 substitutes section 451 of the Companies Act 1985, with modifications to take account of the changes made by new section 447. The offence of knowingly or recklessly providing materially false information in response to a requirement imposed by the Secretary of State or an investigator under section 447 is re-enacted under new section 451(1). But because new section 447 gives the Secretary of State and investigators a new, general power to require answers to questions, the offence under new section 451(1) applies to any materially false information (other than information contained in a pre-existing document produced to the Secretary of State or an investigator) rather than just to materially false explanations of documents or materially false statements about the whereabouts of documents. The Act makes no change to the penalty for the offence in section 451 except that it raises the maximum term of imprisonment on summary conviction in England and Wales from 6 months to 12 months (see section 25 and Schedule 2, Part 3, paragraph 26(3)).
179.Paragraph 20 makes changes to section 451A so that the rules in section 451A(2) to (4) which currently apply to disclosure of information and documents obtained by inspectors, or by the Secretary of State under section 444, also apply to information obtained by inspectors during a visit to premises under new section 453A or by any person accompanying them.
180.Paragraph 21 replaces section 452(1), (2) and (3) of the Companies Act 1985 to take account of the changes made by new section 447 and to deal expressly with confidentiality of communications in Scotland (the counterpart of legal professional privilege in England and Wales).
181.The substance of previous section 452(1) is re-enacted by new section 452(1) and (5), with modifications to provide expressly for confidentiality of communications in Scotland.
182.Previous section 452(2) provided (among other things) that documents which would be protected from disclosure in civil court proceedings on the grounds of legal professional privilege did not have to be produced to the Secretary of State or an investigator under section 447. It is re-enacted by new section 452(2) with modifications so that it also applies to non-documentary information which would be protected in this way and refers expressly to confidentiality of communications in Scotland. New section 452(5) provides, however, that a lawyer can nonetheless be compelled to disclose the name and address of his or her client.
183.Previous section 452(3) provided a measure of protection for documents held by banks which relate to the affairs of their customers. It is re-enacted by new sections 452(3) and (4) with drafting changes. It is also modified so as to extend the protection to non-documentary information relating to the affairs of a bank's customer.
184.Paragraph 25 inserts two new Schedules into the Companies Act 1985 for the purposes of new section 449 (which provides for restrictions on disclosure and gateways). The new Schedules operate in different ways. As far as Schedule 15C is concerned, disclosure is permitted to any of the persons or bodies listed or, by virtue of new section 449(8), to an officer or employee of such a person or body. But this Schedule does not itself allow onward disclosure by the person concerned. Information disclosed to such a person or body remains protected by the restrictions in section 449. Schedule 15D on the other hand permits a disclosure which is made in any of the circumstances it describes. So where a particular description does not refer to disclosure by or to a particular person, disclosure is permitted by or to anyone (so long as it is made in the circumstances described). The majority of the gateways in new Schedule 15D allow disclosure where it is made for the purpose of enabling or assisting a specified person to exercise a specified function.
185.Paragraph 45 of new Schedule 15D contains a gateway to allow disclosures to be made for the purpose of enabling or assisting a body appointed undersection 14 of the present Act (intended to be the Review Panel of the Financial Reporting Review Panel Ltd) to exercise the functions in section 14(2).
186.The Act provides for two gateways, in respect of investigation material, for the Regulator of Community Interest Companies (see the note on section 27 below). Paragraph 40 of new Schedule 15D contains a gateway to allow disclosures to be made for the purpose of enabling or assisting the Regulator to exercise his functions under the Act. In addition, paragraph 29 of Schedule 2 to the Act amends the Companies Act 1989 so that information obtained while assisting an overseas regulatory authority under section 82 of that Act can be disclosed for the same purpose.
187.Paragraph 27 amends section 124A of the Insolvency Act 1986 so that the Secretary of State cannot base a decision to apply to the court for a company to be wound up in the public interest on the information obtained under new section 448A. The Secretary of State will, however, be able to make such a decision on the basis of information obtained under new section 453A (and will also be able to make such a decision on the basis of information obtained under new section 447).
188.Paragraph 28 amends section 8 of the Company Directors Disqualification Act 1986 so that the Secretary of State can base a decision to apply to the court for the disqualification of a director on information obtained under new section 453A.