Companies House and the “Right to be Forgotten”

Right to be Forgotten

With the increasing proliferation and dissemination of information available online, the debate about the balance between individuals’ right to privacy and the public interest in access to information is waged with increasing ferocity.

Google has been fighting a running battle with the European Union over delisting of search results, which has repeatedly seen rulings in favour of privacy. In this context, the recent announcement that Companies House data on dissolved firms will be wiped after six years, rather than 20, is not hugely surprising. This does not mean, however, that it is correct.

The process Google adopts in applying the “Right to be Forgotten” is overseen by individuals within Google, who decide whether an individual’s request merits delisting from the search engine results page. Their decision is based on a set of criteria largely influenced by the public interest in the results being available. In this context, they have removed the URLs relating to UK-based individuals from search results 39% of the time.

A number of examples of the process are given by Google in their Transparency Report, and URLs removed included one mentioning a woman whose husband was murdered ten years’ prior; articles naming a victim of rape; and a report on a contest in which an individual participated as a minor. In contrast, a couple accused of fraud were denied their request to have references removed, as was a request regarding coverage of an individual’s arrest for financial crimes committed in a professional capacity.

All of this is based on Court rulings which have established that, while not every detail of a person’s life should be available online, there are certain aspects which fall clearly within the public interest. While, for example, it would not be in the public interest to keep open access to information concerning a minor offence committed many years ago, a crime pertinent to an individual’s professional conduct clearly would be, at least as long as there is a prospect of that individual seeking to provide professional services to members of the public.

With this in mind, the decision to accelerate the deletion of data on defunct companies appears ill-considered. The “Right to be Forgotten” would appear here to be an insufficient reason to remove from public access important information pertaining to the past business and financial conduct, and use – or abuse – of corporate vehicles, of individuals who may still be commercially active, and still dealing with members of the public. In this context, there must be a material concern that the deletion of this data results from the demands of those individuals who have a vested interest in having information evidencing prior corporate misconduct lost from sight.

Jeffrey Davidson
Jeffrey Davidson

Companies House regulates the use of corporate vehicles which bestow on their users the benefits of trading and carrying on business, including limited liability and the ability to avoid personal liability. That protection is a privilege and, as is well known, is open to both mismanagement and abuse. The privilege should come at a cost – that both mismanagement and abuse are made public and remain in the public domain for as long as the public needs to be able to research and make an informed view on the antecedents of the individuals behind mismanagement and abuse.

Limited companies can be established in minutes. The regulator undertakes no due diligence. Anyone, anywhere in the world, can set up a limited company in the UK. According to gov.uk, there are more than 3.5 million active companies on company registers across the UK, an increase of some 700,000 over the past three years, with new incorporations running at more than 50,000 per month. There are more than 1 million company directors. Barely one thousand of these are disqualified each year, generally as the result of a company insolvency, but there remains a 95% chance that the director of a company which becomes insolvent will not be disqualified and so will be free to set up again in business, including through a “phoenix” company.

The regulator therefore provides the public with virtually no protection against either incompetent or unscrupulous businessmen carrying on their businesses through limited companies. The least it can do is to leave in the public domain as complete a record as possible of the past business dealings of those who still wish to trade with the public, with public bodies (including central and local government, the health service, the taxman) and with our financial institutions under the protection of limited liability.

In short there needs to remain long term access to and transparency of the records and conduct of those hiding behind and being protected by corporate fronts. The public deserves to be able to know and make enquiry in relation to those who wish to continue to do business with it, as do those tasked with uncovering corporate misconduct.

Current and future investigations into corporate misconduct, misfeasance, Company and Insolvency Acts abuse, not to mention actual white collar crime will be fatally hampered by this proposal. Investigations of this sort require meticulous, painstaking research which often need to cover many years of the course of business dealings, and often take years to complete, in addition to the years it can take for the crime to come to light. One such example is an investigation the Serious Fraud Office has undertaken into F.H. Bertling, in which individuals were charged in July 2016 for criminal conduct alleged to have occurred in 2005 and 2006.

The deletion of records after six years is far too quick. The current 20 years remains an appropriate time frame. Anything else will render impotent the forensic approach that is required for such investigations to be effective. A shortening of the period will harm the efforts of government, law enforcement, prosecutors and regulators to clamp down on much of business crime and misconduct and allow more individuals to escape scrutiny – directly contrary to recent commitments to transparency by the government.

Generally, it will be serial users of corporate fronts who take most advantage of the protection of limited companies, and will be the main beneficiaries of a decision to remove corporate records from public view.

Such a step will be particularly damaging to public interest as it is on the public purse that most of the cost of

corporate insolvency falls on the public purse, in unpaid debts to HMRC and other public bodies, and in unpaid wages.

With all of this, the public should be able to make reasonable enquiries to find out if a businessman has a chequered past.

While not all insolvencies result from criminal intent, many arise from the deliberate intent of company directors. Under these proposals, the insolvency Service and other investigators would be unable to establish if an individual had a pattern or history of running companies which become insolvent beyond a small snapshot. All a former Director would have to do to be free of scrutiny on their former dealings would be to sit on the side-lines for six years – much more viable than 20 years.

I suggest that the proposals clearly fly in the face of public interest – various crime-fighting agencies have joined calls from journalists, lawyers and compliance teams in opposition to these proposals. Details of failed business ventures are important for battling fraud, for those considering going into business with these individuals and any individuals considering investing in new companies. The proposals by Companies House will not make any of this any easier.

 

Written by:

Jeffrey Davidson, Managing Director, Honeycomb Forensic Accounting