Proposals to Reform Companies House

The government has announced that, as a result of the 2019 consultation on Corporate Transparency and Register Reform, it proposes to undertake wide-ranging reform of Companies House. These changes are intended to further develop Companies House’s role as an enabler of transactions and economic growth and increase its abilities to combat fraud and money laundering.

What is Companies House?

Companies House is an executive agency of the BEIS and has three main responsibilities:

• incorporating and dissolving limited companies;

• examining and storing company information;

• making information available to the public through the register.

In the last year, users of the register accessed data nearly 9.5 billion times and its worth to users is estimated to be up to £3 billion per year.

The proposals

So, what are the reforms and how will they affect businesses?

Introducing identity verification

• Compulsory identity verification will be introduced for all directors of UK-registered companies as well as for People with Significant Control (PSC).

• Similarly, compulsory identity verification will be required for all individuals who file information on behalf of a company meaning that a director will not be able to be appointed until their identity has been verified by Companies House.

• Company incorporations and filings can continue to be made either directly at Companies House or via an agent. However, in future only properly supervised agents will be able to file information. Such agents will have to provide evidence of the verification they have undertaken.

Accuracy and usability of register data

• The powers of the Registrar of Companies will be reformed to allow them to query information that is submitted to Companies House. Hitherto, they have had to accept information as long as it has been validly submitted.

• The powers the Registrar of Companies has to remove information from the register in certain circumstances for the purposes of accuracy will be broadened.

• The regulation on amendments to accounting reference periods will be tightened.

• Broader aspects of accounts filings, including the exemptions that allow companies to submit micro or dormant accounts will be reviewed.

Protecting personal information

• Directors will no longer be asked to list their occupation, and individuals whose professions are currently shown on the register will be able to have that information suppressed.

• Individuals will be able to ask for their signature, date of birth and residential address (where used as a company’s registered address) to be suppressed from the register.

• It is also proposed to allow someone who has changed their name following a change of gender to have their previous name hidden on the public register.

• All information suppressed as a result of these changes will still be stored securely at Companies House and will be available to law enforcement agencies if needed.

Sharing intelligence

• Bodies that fall under the Anti-Money Laundering regulations will have to report discrepancies between the public register of companies and the information they hold on their customers.

• Cross-referencing of Companies House data against other data sets will be allowed.

• Limited partnerships will be allowed to be “struck off” following a court order.

• Companies House will be given the power to query, and possibly reject, company names before they are registered.

• The process whereby Companies House issues certificates of good standing will be reformed.

What are the benefits of reform?

Businesses, investors and the public need quality information when making decisions and completing transactions. The proposed reforms and the additional checks to be carried out on information before and after registration will increase business confidence when checking the register to conduct research on potential suppliers and partners.

Combatting economic crime

Economic crime in the UK accounts for almost one third of all crime experienced by individuals. It is estimated that the social and economic cost of fraud to individuals in England and Wales is £4.7 billion per year. Against businesses and the public sector, the cost is £5.9 billion. A reformed register will let enforcement agencies, such as the National Crime Agency, more easily trace the information they need to follow up reports of fraud or money laundering.

Tracking repeat offenders

Linking individuals across roles in different companies will make it significantly easier to trace a person’s corporate history. Repeat criminal behaviours, for example those who repeatedly set up and close companies, leaving large debts, will be a lot harder to carry out.

What to remember

Many of these reforms will require legislation to implement, so Companies House will still operate in the current fashion for some time yet. However, businesses should keep the proposed reforms in mind and ensure they take informed legal advice before contemplating any changes to their registered status.

rradar solicitor Lorna Peters says:

“The aim of the reform is to increase reliability and accuracy of the information that is filed at Companies House for greater transparency as to who is behind the company, whilst seeking a level of privacy of personal data for the individual. These reforms will no doubt be welcomed by companies when carrying out due diligence on a potential new business relationship.”

Written by

Lorna Peters, Solicitor at rradar