Uninvited Guests: Home Visits Under New DTI Powers? - Spring 2007

01 April 2007

The Secretary of State for Trade and Industry has for some time had extensive powers to investigate companies and their affairs.

Where it suspected that the company or its members were involved in certain types of wrongful conduct, the Department of Trade and Industry (DTI) may require the production of documents by a company and/or explanations of any document from either the person producing it or others connected with the company. Wrongful conduct may include criminal offences such as fraud or civil matters such as conduct unfairly prejudicial to shareholders.

However, the investigatory powers of the DTI have been extended by the Companies (Audit, Investigations and Community Enterprise) Act 2004 with the relevant provisions coming into force in April 2005, perhaps with unforeseen consequences.

The 2004 Act allows an investigating DTI officer to require production of information in any recorded form (e.g. electronic correspondence or recorded telephone calls).and to enter ‘relevant premises’ and remain there for as long as necessary to obtain material which the investigator thinks will materially assist in the exercise of his/her functions.

‘Relevant premises’ for the purposes of this new power are premises which the DTI investigator believes are used for the purposes of the company’s business he may be accompanied by such other persons as they think appropriate.

For a company and its advisors, these provisions may conjure up some rather worrying scenarios.

For example, where a DTI officer investigating a company believes that a certain individual connected with the company has been carrying on company business at home, then that officer has the right to enter that individual’s home and require the production of information from that person. The officer can then stay on the premises for as long as he thinks necessary in order to perform his functions or the functions of whoever is accompanying the investigating officer in a formal capacity. All that the officer need do to gain entry to the house is produce identification (i.e. no warrant would be required).

For the individual concerned, this could obviously be an unpleasant surprise especially when the obstruction of a person acting pursuant to these provisions is a criminal offence.

Whilst the Act is worded such that an investigator may only enter at ‘all reasonable times’, it is not clear what this actually means. What is concerning is the fact that there are elements of these powers which would appear to be left to the will of the individual DTI investigator.

For the sake of perspective it should be pointed out that formal company investigations are not common. During the year 2005-2006 nearly 4,000 requests were made to the Company Investigations Branch (now part of the Insolvency Service Agency of the DTI) and only 148 investigations were formally commenced. However, the powers that may be exercised in such investigations have raised a few eyebrows amongst civil rights lawyers.
 

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