In the UK, Companies House is the agency that maintains the register of companies and holds information about all companies (and other corporate entities) set up in the UK. The speed and low cost of creating a UK limited company is often highlighted as an essential part of the UK’s entrepreneurial economy.
However, the same qualities make the framework susceptible to exploitation, and following a consultation in 2019, the government has recently published its response on proposals to enhance the role of Companies House and increase the transparency of UK corporate entities. The original consultation proposed a number of reforms designed to (amongst other things) prevent exploitation of the current corporate framework, improve the accuracy of information maintained on the Companies House register, and to help tackle economic crime.
Following its review of the responses to the consultation, the government has now proposed a wide range of reforms to improve the current system and “clamp down on fraud and money laundering”. The government also states that the changes aim to increase the reliability of the data showing who is behind each company so that businesses have greater assurance when they are entering into transactions with other companies, such as when small businesses are consulting the register to research potential suppliers and partners.
In summary, some of the main proposed reforms are as follows:
- Identity Verification – all company directors (and those in similar positions for different corporate entities e.g. members of LLPs, general partners of LPs), People with Significant Control, and those persons filing information with Companies House will be required to verify their identity. Failure to do so will prevent the intended action from proceeding e.g. the director cannot be appointed, the company cannot be incorporated, etc.
Those filing information as agents on behalf of others will need to hold a Companies House agent account and will need to be verified. The information to be provided as an agent is proposed to include details of the agency’s registration and supervision for anti-money laundering purposes.
All existing companies will need to comply with the same requirements and, after a transitional period, unverified individuals will face compliance action.
- Information filed on the register – the Registrar of Companies/Companies House will no longer be obliged to accept all validly submitted company incorporations and will have the discretion to query and check information placed on the register.
The Registrar of Companies currently has limited powers to amend information on the register but under the proposed reforms, the procedure to remove all incorrect information on the register will be simplified.
- Company accounts – it is proposed that Companies House collect data to ensure that where a company is filing a particular type of accounts e.g. small, medium, or large, it is actually eligible to file those accounts.
The Minister for Corporate Responsibility, Lord Callanan, said: “We are committed to making the UK the best place in the world to start and grow a business. The reforms we are making to the Companies House register will provide businesses with greater confidence in their transactions…mandatory identity verification will mean criminals have no place to hide – allowing us to clamp down on fraud and money laundering and ensure people cannot manipulate the UK market for their own financial gain, whilst ensuring for the majority that the processes for setting up and running a company remain quick and easy.”
It remains to be seen what the final reforms will end up looking like but the proposed measures do appear to be a step in the right direction. It will be interesting to see how the proposals develop because while it is important to crack down on criminal exploitation, the government will want to ensure that any measures do not greatly adversely affect the carrying on of business in the UK.
To read the government’s full response, please click here.