Comments from ACCA to the Department for Business, Innovation and Skills (BIS), 18 June 2010.
ACCA is pleased to comment on the proposals put forward in the above consultation document. ACCA is a professional accountancy body which represents over 140,000 qualified members both in the UK and around the world. The comments in this letter represent the views of our Business Law and Insolvency Committees, members of both groups having particular perspectives on this issue.
Our position overall on this matter is that, whereas there may be good reasons for making some of the detailed changes put forward in the document, it would be better in the long term to attempt the more fundamental transition to a form of notice filing along the lines proposed by both the Company Law Reform group and the Law Commission in the recent past. We are struck above all by the point made in the document that there is a very high level of compliance with the current rules – this is borne out by our experience and causes us to question whether there is a pressing need to make more than a small number of technical changes to the current system.
In particular, we think that the rule which requires filing of a new charge within 21 days of its creation is one which is both well understood and serves a vital purpose, for insolvency practitioners, companies and lenders. It does not impose an unreasonable burden and provides the onus for those charging or those being charged to ensure that the new charge is filed. The fact that there is a high level of compliance with this requirement serves to underline its continued relevance. We recommend, therefore, that the rule on that matter should be retained as it is.
The matters where we agree that change is warranted are as follows:
It is important that the law keeps pace with developments in business and if new innovations are kept off the register purely because they are not covered by legislation drafted some time earlier, that would be potentially harmful to the interest of those being charged and those prospectively being charged. The change on the lines proposed would help to make the legislation more future-proof.
The sanction of invalidity is the material element in the case of registration or non-registration. Most charges are filed by chargees, in whose interests it clearly is to ensure that registration is effected. It makes little sense for the law to provide for a criminal penalty for cases of failure to protect one’s own interests.
We concur with the view expressed in the document that very little use is made of the legal right to inspect individual company registers. Moreover, the obligation to maintain registers of charges seems to be one which is characterised by widespread non-compliance in practice. This is no doubt the product of a feeling, shared by companies and third parties alike, that the definitive register is that maintained at Companies House. We agree that this apparent perception should become the real and official position, and that all concerned should recognise the definitive status of the information held at Companies House (which is still, in our experience, consulted on a fairly regular basis).
The information held on the central file is often out-of-date and misleading, with charges still registered after they have been satisfied – this situation is potentially harmful to the interests of companies since it could deter lenders from advancing funds. It would be most helpful if measures, on the lines discussed in proposal M, could be introduced to tidy up the information held on spent charges on the register.
Many of the other proposals in the document seem unobjectionable. It would make sense to us to have a single set of rules applicable to all UK companies (as is already the case with respect to charges created by overseas companies). We do not disagree with the proposals to rationalise the list of particulars that need to be filed, and support the move towards allowing the electronic filing of charge-related information.
But as said above, the longer term aim should be, in our view, to move towards a system based on notice filing. In view of this we consider that any changes made now should focus only on those matters in most pressing need of reform.