Contributors
On 28 February 2022, BEIS published a White Paper on corporate transparency and register reform (White Paper), which sets out plans to enhance the role of Companies House and to increase the transparency of UK corporate entities. We have been expecting this announcement for some time. The reforms were first consulted upon in 2019 but have been accelerated in response to the current crisis in Ukraine. They will have a significant impact on how companies are administered in the UK. As commented in the White Paper, "the Government would like to see Companies House play an expanded role so will change its statutory role from being a largely passive recipient of information to a much more active gatekeeper over company creation and custodian of more reliable data."
We outline a few of the key reforms below.
| Identity verification |
In order to make the information on the Register more reliable, Companies House are currently developing a digital identity service to ensure that those appointed as directors and people with significant control (PSC) and those who complete filings on behalf of entities registered at Companies House are who they say they are. This ID service will link a director or PSC with an authorised identity document and their appointment will only be accepted at Companies House once ID checks have been cleared. This will apply to all new and existing company directors, PSCs, all directors of relevant legal entities, members of LLPs and general partners of limited partnerships. Identity verification will also apply to agents who make filings on behalf of entities registered at Companies House. |
| Corporate Directors |
The Small Business, Enterprise and Employment Act 2015 indicated that the appointment of corporate directors would be prohibited once the legislation came into force but those provisions are yet to be commenced and corporate directors are currently still permitted. The current proposal is that corporate directors will no longer be permitted unless an exception applies where all of the directors in the corporate director are natural persons and those natural persons are (before appointment as a corporate director commences) subject to the Companies House identity verification. A corporate entity will only be able to act as a corporate director if it is registered in the UK. Different rules will apply to LLPs or corporate general partners of LPs. It is proposed that corporate members or corporate general partners must provide details of a natural person in management who again must have their identity verified. The Government will consider whether any further restrictions are needed for corporate members of LLPs or corporate general partners of LPs. |
| Companies | It is proposed that Companies House should have a querying power which will allow them to question information submitted to them either before it is placed on the Register or post-registration (this will also extend to information that is already currently on the Register). This power would be discretionary and exercised on a risk-based approach meaning that not all information will be queried but information that appears fraudulent, suspicious or that impacts the integrity of the register will be targeted. |
| Other proposals |
Transparency of company ownership: Common feedback to Companies House has been that there is insufficient detail displayed on shareholders. The reform proposes to introduce a requirement for private companies, and traded companies where shareholders hold at least 5% of the issued shares of any class of the company, to provide a one-off full shareholder list (to be included on the confirmation statement filing). Improving financial information on the Register: The proposed reform indicates that there will be additional validation checks on financial information delivered to Companies House but that these will be limited to ensure information is coherent and consistent with accounts submitted to other relevant agencies. There is also a suggestion to close the loophole for the unrestricted shortening of a company's accounting reference date to align with the restrictions to extending an accounting reference date. |
The implementation timetable for the proposed reforms is currently unclear and we will update this article as and when this is confirmed and draft legislation is published.
Go here for further information.
Attributed to Laura Brumwell, Paralegal.
