Outcomes From the Corporate Transparency and Register Reform Consultation
Over the past few years, the government has been consulting on corporate transparency and reform of the Companies Register.
The aim was to enhance the role of Companies House, increase the transparency of UK corporate entities and help combat economic crime.
What was the original consultation about?
The original consultation, entitled “Corporate Transparency and Register Reform”, set out a proposed reform of the information which limited companies are required to disclose and the tightening of checks on the information submitted to Companies House.
In line with this, various measures were proposed to improve the exchange of information between Companies House and law enforcement. This is with the intention of reducing money laundering and other white-collar crime.
What was the outcome of this consultation?
The response was to have proposed reforms in four primary areas:
1. Knowing who is setting up, managing, and controlling corporate entities
To increase corporate transparency. The government:
- Introduced compulsory identity verifications for all directors and People with Significant Control (PSC) of UK registered companies;
- Introduced compulsory identity verification for all individuals who file information on behalf of a company; and
- Required formation agents to provide evidence of verification checks they have undertaken.
When a new company director is appointed, they will not be shown on the Companies Register until their identity has been verified.
Further to this, any PSCs who have not verified their identity will be flagged as non-verified on the public register, this will be considered as an offence.
2. Improving the accuracy and usability of data on the Companies Register
Introduce a statutory power for the Registrar of Companies to query and check information before it is placed on the public register.
The Registrar’s powers to remove or amend inaccurate information from the public register will be enhanced.
3. Protecting personal information
Company directors will no longer have to list their occupation on the public register. If they already have an occupation listed, the information will be suppressed.
There is a range of information that company directors can ask to be suppressed, including their signature, their day of birth (but not month or year), and their residential address.
Any information that has been suppressed as a result of the reforms will continue to be stored securely by Companies House and will be available to law enforcement.
4. Measures to deter the abuse of corporate entities
Companies House will be able to cross-reference data against other data sets using legislative gateways to combat criminal activity.
The Registrar’s powers to remove a company name once it has been registered will be enhanced.
What is the new consultation about?
A follow-up consultation was published focusing on three detailed areas of the reform:
1. Powers of Registrar
Proposal to introduce new powers to query information
This power will be used in cases of identified errors and anomalies where the anomaly appears to be fraudulent, suspicious or could have an impact on the integrity of the Register. There will also be the power to query company names and prevent them from being registered.
Reform of existing powers
The Registrar will be able to remove inaccurate information from the Companies Register. They will also be able to require certain checks to be performed regarding the rectification of registered office addresses and removal of directors’ details.
The Registrar would also be able to compel companies to file information electronically and effectively ban them from using paper submission.
Rules governing company registers
Companies will no longer be required to keep a Register of Directors.
2. Implementing a ban of corporate directors
A corporate director is a company director that is not an individual, but rather a separate company.
This ban would mean that all company directors would need to be natural persons (e.g. human directors). Corporate directors will be prohibited unless the board of the corporate director only contains natural persons and those natural persons have had their identities verified.
3. Improving quality of financial information
This proposal is set out under the following themes:
- How information is submitted to Companies House: company accounts will need to be delivered digitally. It also looks at the possibility of reducing timescales involved in filing company accounts.
- What information should be filed at Companies House: company directors will be required to confirm their company’s eligibility to file certain types of accounts.
- What Companies House does with this information: proposed to increase checks of submitted company accounts. It also asks for views on how financial information should be displayed on the Register.
The next steps
The follow-up consultations closed on 3rd February 2021. The government will now review these and issue its own response.
If they are accepted, the proposals from the consultations will be transformed into legislation and implemented by Companies House.
How should companies prepare?
Any legislative changes could be a while away yet. However, there are certain practical steps that can be taken:
- Ensure your company doesn’t rely on paper filing and you are able to submit accounts electronically.
- Simplify your corporate structures and ensure all directors are natural persons as far as possible.
- Make sure all directors and PSCs are able to verify their identity.
- Consider whether you want any information about directors suppressed from the public register.
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