Much has been made in the press regarding the news that Companies House is considering amending its current policy of retaining the records of dissolved businesses for 20 years post dissolution. This motion has reportedly been born out of a decision by the European Court of Justice in spring 2014 to ‘create a right to be forgotten.’

The argument has been set out: should those connected to businesses have a right to be forgotten, or should the public have a right to remember them? Tim Gower, solicitor in our Corporate & Commercial team explores here:

Before giving my views, I think it is important to note that not all businesses will have been dissolved because they have “failed”. Almost every broadsheet seems to talk about the public right to investigate directors of “failed” businesses, but there may be sound business reasons behind dissolving a company that are not linked to a lack of profitability or poor management.

The rationale

Those in the “forget” camp claim that the Companies House policy of holding records for 20 years is contradictory to data protection law.

Whilst the future is uncertain regarding data protection, the current position under the Data Protection Act 1998 (“DPA”) is that data should not be kept for longer than is necessary for the purpose that it is processed.

Therefore, a claim that Companies House data retention policy is contrary to the DPA would turn on the question of what is the purpose of Companies House processing (or displaying) the information of English and Welsh companies, their directors and their shareholders.

Those in the “remember” camp claim that the public are entitled to know the history behind the people they may be dealing with, including whether that person has been involved with a company that was voluntarily placed, or forced, into insolvency.

From the “remember” side’s claim, it is possible to deduce their belief that Companies House processes its data for the purpose of enabling the public to know who they are dealing with, but is a retention period of 20 years longer than is necessary to carry out that purpose?

Possible implications

I have to say, having always been able to use the “public record” (after all that is what the Companies House information is often dubbed) to carry out due diligence into trading and former trading companies, their directors and their shareholders, I have not thought too much about how I would go about obtaining these details from a period longer ago than Companies House displays.

However, having used tracing agents and other professional services to obtain information that for most is not available, I am fairly sure that for the right fee, the information would be able to be obtained.

So, apart from a likely increase in fees and costs in carrying out due diligence, I would estimate there will be more cutting of corners, attempted saving on fees, and proceeding in good faith rather than spending the money to ensure the checks are made that should be made. Ultimately, creating more problems and expense for themselves further down the line.

Predicted outcome

Companies House has reportedly pledged to hold a public consultation regarding the rule change. So, what do I think will be the outcome?

Well, Companies House now operates under the Department for Business, Energy and Industrial Strategy. With David Cameron’s Government making much-a-do about increasing the transparency of the UK’s corporate world and taking measures such as introducing the Persons of Significant Control register requirements, it would seem inconsistent for Companies House to hide information relating to old corporate bodies in too much of a drastic measure.