Companies House flaws exposes risks to UK Companies and Lenders

Companies House flaws exposes risks to UK Companies and Lenders

It’s been a tricky start to the Month for Companies House. Monday 4th saw the first of a slew of reforms designed to make the register more useful and accurate. However, the night before news broke of erroneous filings that led to the register calling an urgent review.

What happened?

UK Finance raised the flag after 190 businesses had been subject to erroneous filings at the UK company register without the knowledge of those affected. Amongst the names were brands such as Sainsbury’s, Nero Coffee Roasting, and Zizzi Restaurant.

The documents are said to have been submitted to Companies House by an individual in County Fermanagh in Northern Ireland.

What were the rogue filings?

These erroneous filings related to “charges”, a filing typically used by banks to show that a security e.g. property, had a charge on it in return for lending money. The erroneous filings exposed a loophole allowing anyone to remove a charge, which would mean the lender would no longer appear to be entitled to take possession of the assets in the event of a failure to pay.

How bad is it?

Unfortunately, the news doesn’t come as a surprise to those who work with the register regularly. For years flaws in the lack of checks have been exposed. However, this latest instance will still cause alarm.

Companies House has explained that an incorrect entry, as was the case here, saying a charge has been satisfied would not cancel the charge. But there will be wider consequences for credit rating purposes for those involved.

Plus, there are ways that many of these companies could have been alerted sooner.

What should companies do?

Companies House has launched an urgent review into this, in addition to all of the changes designed to modernise the register to make it fit for purpose. However, Elemental’s Managing Director, Nick Lindsay, points out that the reforms come after years of underinvestment. “Companies House has a full roadmap, but timescales are unclear, it is also to be seen whether they receive the resources they need to achieve the ambition fully”.

He goes on to advise that these instances appeared to be targeted at random. Companies should check their recent filings to ensure there is nothing there that they don’t recognise. Going forward, those responsible for the company records should ensure someone is accountable for monitoring them.

No clients of Elemental’s compliance service were affected by these erroneous filings. Elemental actively monitors the Companies House records for the clients of its annual compliance service and alerts them if any filings have taken place without the prior knowledge of our company secretarial team. To find out more about how we can keep your Companies House records secure, please get in touch with us.

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