BEIS consultation: Corporate transparency and Companies House reform

BEIS has published a consultation on its proposals to strengthen the UK's company registration framework at Companies House.

On 05 May 2019, BEIS published a consultation on its proposals to strengthen the UK’s company registration framework at Companies House. The consultation considers reforms to the information that companies are required to disclose, increasing the checks on that information and measures to improve the exchange of information between Companies House and law enforcement bodies.
 
If all of the Government’s proposals were to be implemented, this would amount to the most significant reform of the company registration system in the UK since a register was first introduced in 1844.
 
The closing date for the consultation is 05 August 2019.

The Government’s proposals

The Government’s proposed reforms aim to increase the accuracy and usefulness of the information available on the companies register at Companies House. This should increase the transparency of UK corporate entities and help to combat corporate crime.

The Government intends that the reforms will apply generally to any corporate body that is subject to the disclosure requirements of the Companies Act 2006, where relevant. This will include private and public limited companies, unlimited companies, unregistered companies and overseas companies. Limited liability partnerships and limited partnerships will also be caught. Certain of the changes will also be relevant to those entities that will fall under the provisions of the draft Registration of Overseas Entities Bill (ie beneficial owners of overseas entities that own UK property).

Most of the measures outlined in the consultation will need primary legislation to enact, as well as significant changes to systems, processes and staffing at Companies House. This means that the changes will take several years to deliver.

The proposed reforms are set out in four main parts, as summarised below.

Knowing who is setting up, managing and controlling corporate entities

The government is proposing that individuals who have a key role in companies should have their identity verified. This would apply to directors, People with Significant Control (PSCs) and the persons that file information at Companies House.

Identity checks would be run not only on incorporation of a company but also throughout its lifetime. Although the focus would be on incorporations and filings from individuals, evidence of adequate due diligence checks would be required from third-party incorporation agents.

If prospective directors are unable to verify their identity, then Companies House will not incorporate the company. The law will be amended to make the appointment of a new director to an existing company conditional on the director being able to verify their identity and it will be an offence for a registered company to purport to appoint a person whose identity has not been verified. Existing directors and PSCs still in active roles will need to be verified in line with the new requirements.

The government is also considering whether more information should be disclosed about shareholders, including possible identity verification.

Improving the accuracy and usability of data on the Companies Register

This part of the consultation sets out proposed reforms that would deliver better quality of information on the register, building on the proposals detailed above (knowing who is setting up, managing and controlling corporate entities). There are two themes to these proposals:

  • reforms that would allow Companies House more discretion to question the information submitted to it and amend or remove information after it has been registered, and
  • reforms to the information disclosed that will improve the usefulness of that information for those accessing company records.

The Government is also proposing to introduce a more uniform format for the submission of accounts to allow for automated checks and improved statistical analysis. It also intends to limit the number of times a company can shorten its accounting reference period but has yet to specify what the maximum should be.

Protecting personal information

Information currently held by Companies House falls into public and non-public information. Companies House only makes non-public information available, under strict statutory controls, to certain public authorities such as the police. The usual residential addresses of directors and people with significant control are made available to credit reference agencies unless those individuals have been granted protection.

As set out in the consultation, the Government is proposing to extend the amount of information that companies and their associated individuals are required to provide, including information collected through the identity verification process and information provided as a result of checks by Companies House prior to filing documentation on the register. Virtually none of this new information would be available publicly on the register, resulting in the amount of non-public information on the register exceeding the publicly available information.

The Government is proposing that there should be two tiers of access to non-public information, with limited rights being enjoyed by credit reference agencies and broader access being given to specified public authorities. There are no proposals to allow credit reference agencies to have access to the additional information that will be obtained once the proposed reforms are in place. This information would only be accessible internally to Companies House and to public authorities.

The consultation also proposes some minor changes to the information required on company directors, including ending the requirement to disclose a director’s occupation and allowing individuals to apply to have their signature suppressed when it is publicly available on historic filings.

Ensuring compliance, sharing intelligence and other measures to deter abuse of corporate entities

This part of the consultation outlines how Companies House data on UK corporate bodies could be improved through cross checks against data held by other Government and private sector bodies. Regulated entities could be required to report anomalies they identify on the register to Companies House and new powers are proposed to allow Companies House to share information with law enforcement partners where this is thought necessary for the purpose of preventing, identifying or prosecuting crime.

Evidence from law enforcement agencies suggests that an additional source of information would be the location of bank accounts used by companies, particularly in money laundering investigations. As such, the Government is considering whether there should be a new filing requirement for a UK company to notify Companies House within 14 days of a non-UK bank account being opened for the company. Full bank account information would not be made publicly available on the register, but these details would be available to law enforcement agencies on request.

Other proposed measures to deter abuse of corporate entities include:

  • allowing a court to order a limited partnership to no longer carry on its business activities if it is in the public interest to do so
  • imposing limits on the number of concurrent directorships any one individual can hold (and views are sought on what the maximum number should be), and
  • action to deter misuse of company names and addresses – companies could be required to show that they are entitled to use an address as their registered office and Companies House will be given additional powers to query and reject applications to use a company name.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.