Companies House Reform: Certification of information on the Register

Companies House Reform: Certification of information on the Register

Companies House will provide a certificate of good standing for any company providing it is up to date with its filings. The lack of verification of the information provided to Companies House means that this process is open to abuse as such certificates are treated in high esteem in many foreign jurisdictions. Below, Elemental reviews the government’s acknowledgement of a clear need for reform.

Corporate transparency and register reform: Government Response

In the third of a series of articles examining the recently published government response to the consultation on  enhancing the role of Companies House and transparency of UK corporate entities, we review the process of certification of information on the Register and the proposals for reform.

Companies House: certified copies and certificates

A company can order a certificate of incorporation with certified facts. This is often referred to as a Certificate of Good Standing because it confirms that a company is up to date with its filings.

Such a certificate is no reflection on the financial standing of the company, but this is not widely understood. Indeed, the responses to the government consultation reveal a general lack of understanding of the certification process.

As Elemental has previously noted, the fact that the information being certified has not been verified by Companies House presents an opportunity for abuse and fraudulent activity.

Many jurisdictions require such certificates to complete client due diligence. If a company’s record is incorrect but all filings have been completed in a valid form, Companies House will not currently raise any queries but will issue the certificate, adding legitimacy to the incorrect records.

Certificate of Good Standing Reform

The government concluded from the responses received to its recent consultation that there is a clear need to reform how and under what circumstances Companies House issues certificates.

It is not expected that subsequent reforms will require new legislation to enact. The process will include a full review of policies and processes related to the certification of register information. The review will examine the purpose of certificates, what can be certified and how it is certified.

Suggestions from the consultation include applying stricter criteria (such as the filing of first accounts) before such a certificate is issued or even removing the term ‘Good Standing’ entirely to avoid any misinterpretation.

Elemental feels that the current risk of abuse could be removed if the other reforms in respect of the verification of information contained on the register are enacted. Until then, any tweaking of the procedure may reduce the risk but will not remove it entirely. Until the information on the Register is verifiably accurate, risks will remain.

How Elemental can help

We believe that company secretarial and compliance matters. These reforms show how important they are and how much is likely to be changing over the next few years. For more information on our company secretarial services or to speak to one of our experts, please get in touch.

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