The UK Government is continuing to push forward with its proposals to reform Companies House with a view to increasing the transparency of UK companies and reducing the scope for fraud and money laundering in the UK, whilst ensuring that the UK remains an attractive jurisdiction to start and grow a business.
The Government has published its response to its May 2019 consultation and set out a number of additional or amended proposals. The key points arising out of these proposals are set out in more detail below.
Compulsory identity verification for directors, persons with significant control and others
In order to clamp down on money laundering and fraud carried out using UK corporate entities, certain persons will be required to verify their identity. The persons to be required to verify their entity are:
- company directors;
- general partners of limited partnerships;
- designated members in limited liability partnerships;
- persons with significant control (PSCs); and
- persons filing information at Companies House on a company’s behalf.
It is intended that the compulsory verification of the identity will be undertaken digitally, and in most cases will be capable of being completed in a matter of minutes. Once a person has completed the verification process they will have their own account which can be used to access all services offered by Companies House.
It had originally been proposed that all shareholders of UK corporate entities would be required to verify their identity, but the Government is no longer pursuing such action. Instead, the new requirements will only affect shareholders who are also PSCs.
Supplemental to the verification requirement, it is also proposed that an appointment of a director will have no legal effect or be displayed at Companies House until the director’s identity has been verified. A failure to complete the verification will constitute an offence, and it is expected that sanctions are likely to be similar to those for existing PSC offences.
The identity verification requirements will apply to all existing companies and there is likely to be a transitional period which will allow PSCs and directors to set up a verified account with Companies House. Upon the expiry of the transitional period, any individuals who have not met the verification requirements will be subject to prosecution.
Protection of personal information
The requirement for directors to list their occupation is proposed to be repealed, and a process will be established for individuals to remove reference to their profession from the register should anyone wish to do so. It will also be possible to request that an individual’s signature, the day of their date of birth and their residential address (where such address is a registered office) no longer be available to the public.
Any information suppressed as a result of the reforms will continue to be held securely by Companies House, whilst law enforcement agencies will be able to access the information.
Increasing accuracy of Companies House register information
Subject to further consultation, it is proposed that Companies House will be reformed to give it discretion to review, query and check information submitted to it before it is accepted for filing and so that it is no longer required to accept any application to incorporate and register a new company that is validly submitted.
The Registrar’s ability to review and amend existing information on the register will also be extended, to make it easier to remove or change or delete information which is incorrect or inaccurate. If there are questions regarding the validity of information on the register, the company that has filed the information will be required to raise and support with evidence any objection to a proposed amendment.
Reform of company accounts
Subject to further consultation, it is proposed that all types of annual accounts will be allowed to be filed digitally and full iXBRL tagging will be capable of being used to allow software to analyse and cross-reference data across different sets of accounts.
It is also proposed that the rules in relation to shortening accounting a company’s reference date are amended to allow companies to shorten it only once every five years. Rules in relation to extending a company’s accounting reference date will also be reviewed to ensure consistency in the approach taken in relation to shortening the accounting reference date.
It is proposed that Companies House will be granted additional powers to query and, if deemed necessary, reject company names before a company is registered or an existing company’s name is changed. The role of the Company Names Adjudicator will also be reviewed and potentially strengthened to allow it to remove a company name following registration.
Clarifying exemptions for PSCs
Additional information may be requested from companies claiming an exemption from holding a PSC register. Such information may include details of the regulated market and listing in relation to a company’s PSC.
Dissolved company records
Companies House will make historic information in relation to dissolved companies going back 20 years’ freely available, rather than the current historic period of 6 years. This will be done only once legislation is enacted to create a process by which individuals can request that their personal information is redacted.
Following publication of the proposals, the next step will the publication of a more comprehensive set of proposals that will set out how the reforms are to be implemented. Once feedback on the proposals has been considered, the Government will seek to enact the reforms as and when it is able to do so.