20 June 2019
On 5 May the Government published Corporate Transparency and Register Reform, a consultation on options to enhance the role of Companies House and increase the transparency of UK corporate entities. When implemented the proposals will affect all incorporated businesses, their directors and shareholders.
Since 1844 there have been registers in this country of all limited companies and similar entities. Company directors, who often delegate compliance to firms such as ours, will be aware of the need to meet a couple of major deadlines each year: the filing of annual accounts and the submission of the annual return. Any other changes, such as the appointment of a directors, need also to be reported, these days almost always online. The Government claims that we have one of the most complete and transparent registers in the world, which facilitates trade and makes the UK attractive to foreign investors.
There are now more than 4 million companies and similar entities on the Register, as well as 6.7 million directors and 8.4 million shareholders. Since 2016 the Register also lists ‘Persons with Significant Control’. Every year Companies House deals with 11.5 million filings of documents (86.7% online). Much of the information is available online and free of charge and last year this was accessed 6.5 billion times!
Room for improvement
The Department for Business, Energy and Industrial Strategy has decided to deal with a number of serious problems with the Register:
- The misuse of UK registered entities by international criminals and corrupt élites.
- Inaccuracies due to error and fraud (including, for example, fake audit reports.)
- Identity theft – e.g. criminals using personal details of company officers found on the Register.
- Limited cross-checks – the lack of information-sharing with other agencies that could be used to detect crime.
The proposals, out for consultation until 5 August, fall into four main headings:
Knowing who is setting up, managing and controlling corporate entities
There will be new procedures to require identity checks on all those seeking to form companies. Such checks will also need to be carried out on anyone who is appointed a director or who becomes a person with significant control. This measure may also be extended in due course to shareholders. Companies will be required to carry out similar identity checks periodically even when no changes occur.
Improving the accuracy and usability of data on the Register
Companies House will have more discretion to query, amend, reject or remove data. There will be more uniformity in the permitted format of annual accounts to enable better statistical comparisons.
Protection of personal information
Currently data held on the Register comprises two types: that which is available to the public and that which isn’t. In future Companies House will hold more detailed data and the non-public information will be divided into two tiers: information which can be accessed by credit agencies, and the rest of the non-public data to which specified public authorities will have access.
There will no longer be a requirement to disclose directors’ occupations. Also, to prevent fraudsters from imitating directors’ signatures these will be obscured on any historical and current documents filed.
Ensuring compliance, sharing intelligence and other measures to deter data abuse
Companies House will be authorised to cross-check data with other agencies, including law enforcement partners. Regulated entities may be obliged to report any anomalies they find on the Register.
Another proposal is to compel companies to notify the Registrar of any bank accounts held outside the UK. Regulations may include one to restrict the number of directorships held by any one individual, and a requirement for a company to provide evidence that it has the right to use its registered office address.
Critics may be inclined to see signs of Big Brother in these proposals, others may be surprised to hear that the Companies Registrar is so late in bringing in identity checks and data-sharing. The implementation date will depend on the availability of Parliamentary time. Within a couple of years, however, it seems likely that all companies will have to have in place the same kind of identity checks as most regulated bodies, such as banks and accountants, have now. As ever, increased bureaucracy is the price business pays for keeping the public safe.
Follow this link if you would like to read the consultation document, or indeed make representations yourself. If this firm is already instructed to deal with your Companies Act compliance matters we will contact you in due course and where appropriate help you to set up the necessary procedures. To find out more just contact me firstname.lastname@example.org or complete our contact form.