March 22, 2022 Companies House Overhaul
The government has set out its final position on Companies House reforms ahead of introducing legislation. The changes are described as the biggest since the Registrar was created in 1644 and £83m has already been put aside for the transformation.
The government began consultations in 2019, publishing its first response in September 2020. Since then, there have been three further consultations. The reforms are aimed at fighting crime, protecting individuals from fraud and boosting enterprise.
Below, we take a practical look at the final publication and what it means for those who use Companies House services.
1. From passive to active – The government will shift the statutory role of Companies House from a passive library of information to an active agent using a risk-based approach. In practice, this means powers to query suspicious appointments, filings and patterns of activity.
2. Individual Accounts – All directors, people with significant control (PSCs), and those presenting information to the Registrar will have an account that links all their appointments. This will make it easier to trace individuals and navigate the register.
3. Identity verification – those setting up, managing and controlling companies will have their identity verified. Those who fail to verify their identity will be subject to new criminal and civil sanctions. Elemental, as an anti-money laundering supervised company formation agent, will be able to conduct this process.
4. Privacy and Fraud prevention – those whose personal information has been made public on the register in the past, will be able to apply to have some (or all) of the information suppressed. Currently, it is possible to fraudulently register an appointment at Companies House without an individual’s consent – new powers will prevent this from happening.
5. Corporate Directors – Companies will be allowed a maximum of one ‘layer’ of corporate directors, which must be based in the UK, and the natural persons directing that corporate director will be subject to identity verification.
6. Going Digital – Currently 91% of users take up the digital services but going forward Companies House will require all companies to file digitally to increase efficiency and data accessibility.
7. Consistent Financial information – new requirements to file a single set of accounts and simplifying accounts filing options to create a more consistent dataset between accounts and between Companies House and HMRC, making it easier to identify discrepancies.
8. Better assurance – professions regulated by the anti-money laundering regulations, such as legal and accountancy firms, will be able to take more assurance from the register, supporting their own due diligence before accepting new business clients.
9. Company Names – new powers to query names that appear to attempt to target a pre-existing company’s goodwill. Including powers to direct a company to change the name if a satisfactory response is not provided.
10. Improved Shareholders and PSC information – companies will be required to provide the full names and a full list of all shareholders owning 5% or more of a company’s shares plus there will be greater scrutiny of those claiming exemptions from PSC reporting rules.
Despite the introduction of many proposed changes, the government is at pains to maintain the current strength of the regime when it comes to fast service and low cost. UK fees are amongst the lowest in the world and in 2020-21 Companies House incorporated 810,316 companies with 99% of applications being processed within 24 hours. Many of the proposals follow a risk-based approach and allow retrospective enforcement; however, it will remain a challenge to balance speed and integrity. Elemental will continue to monitor the reforms as they become law and update our company secretarial and company formation clients.