Companies House Reforms Announced
Posted 3 years ago by Tracy
After almost 18 months of debate and consultation, reforms intended to reduce fraud and give businesses greater confidence in transactions have been announced by Companies House, the UK’s registrar of companies.
On 5 May 2019, Companies House and the Department for Business, Energy and Industrial Strategy published a consultation ‘Corporate Transparency and Register Reform’, which it claimed would represent "the biggest changes to the UK system for setting up and operating companies since the UK company register was created in 1844".
The reforms came about due to concerns about misuse, with fears that UK companies are being used by international criminals to launder money and that thieves are stealing the identities of directors by using their publicly available details.
As we previously discussed, the reforms were due to cover four key areas:
- Knowing Who Is Setting Up, Managing and Controlling Corporate Entities
- Improving the Accuracy and Usability of Data on the Companies Register
- Protecting Personal Information
- Ensuring Compliance, Sharing Intelligence, Other Measures to Deter Abuse of Corporate Entities
Many of the reforms focus on the first two points, with the introduction of compulsory identity verification for directors the most significant announcement. Under this rule, directors will not be able to be appointed until their identity has been verified by Companies House. Companies House will also require evidence of checks carried out by professional service providers submitting information on behalf of clients.
The aim is to make it easier to trace those who are committing fraud or money laundering while offering greater assurances to businesses when they are entering into transactions with other companies.
Minister for Corporate Responsibility Lord Callanan said: “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.”
The reforms will also give Companies House stronger powers to query, seek evidence for, amend or remove information and to share it with law enforcement partners when certain conditions are met.
The intention is also to give users greater protections over their personal data by improving the processes for removing personal information from the register.
Louise Smyth, chief executive of Companies House, explained: “We know how valuable our data is, not just to businesses but to law enforcement and these reforms will unlock that value even further.”
What impact will the reforms have when setting up a business?
According to Companies House, the reforms will not affect how long it takes to form a company or submit filings. It claims that identity verification will “take place through a fast, efficient, digital process and is expected to take a matter of minutes”, meaning most companies will still be incorporated within 24 hours.
When will the reforms be introduced?
The government will bring forward legislation to enact the reforms to the register when Parliamentary time allows. Further consultation on changes to make Companies House more useful and usable – including introducing full digital tagging of accounts to ensure consistency, easier identification and comparability of information on the register – has also been proposed.
Further Reading
Key Takeaways from Spring Budget 2023: Corporation Tax Rises and Investment Zones
Autumn Budget 2021: Five Key Announcements for Small Businesses