The Government is proposing substantial changes to registration and filing processes at Companies House and its general role within the current legislative framework. This article outlines the various reforms that are envisaged, the timeframe for such reforms and how they may affect you in practice.
Key areas of reform and benefits
The key areas of reform (as set out in the published consultation response on the Government website) focus on matters such as improving content at Companies House and putting into place further protections regarding data protection and include:
- Knowing who is setting up, managing and controlling corporate entities;
- Improving the accuracy and usability of data on the companies register;
- Protecting personal information; and
- Ensuring compliance, sharing intelligence, other measures to deter abuse of corporate entities.
Further detail on each of these areas is included in our Q&A format below.
With reform comes various anticipated benefits, not just economically but also financially. With the implementation of additional checks on information submitted to Companies House and greater aims for transparency, economically this means that businesses, investors and professionals will be able to have greater reliance on the information being sought and save them time and resources. Financially, the more accurate information will allow UK law enforcement to allocate costs to other areas, rather than on investigating the accuracy of information when tracking down those who misuse companies and use them as a vehicle for criminal behaviour. The concept of ‘phoenixing’ will also be greatly reduced, where individuals incorporate and then close companies repeatedly, each having incurred substantial debts.
Who will these reforms impact?
Individuals such as company directors, persons of significant control (PSCs), and business professionals that access a company’s details. Agents that act on behalf of directors and companies will also be affected and any registered companies, LLPs and limited partnerships.
All company directors, PSCs and agents will need to have a verified account at Companies House. There will be a transitional period where directors and PSCs can carry on their existing role whilst going through the process of verifying their account. But once the transitional period has ended, unverified individuals will face possible action.
Shareholders will not be affected by the new identity verification process.
What are the new ID requirements?
It is anticipated that a combination of document and digital-based verification will be used. Most individuals should be able to verify their identity digitally in minutes. There are ongoing enquiries with identity providers so the final process is not yet finalised.
What about personal data?
Directors won’t have to list their occupation as part of the new reforms and any existing information, including residential address, signatures and day of birth will become “suppressed from the register”, but still kept at Companies House securely (and not available to the public).
Does this mean the register at Companies House will be more accurate?
The aim is for information to be more reliable and accurate as the Registrar of Companies will be given greater powers to question and challenge information that is submitted, in particular that the Registrar is not obligated to accept a validly submitted application to register a company.
It will also become easier to add or remove inaccurate information that is currently held at Companies House, and further legislation is envisaged to enable the cross-referencing of Companies House data against other data values.
What if I hold roles in more than one company, do I need to have separate accounts?
No, separate accounts are not necessary. Each individual will have a single user account that can be linked to multiple roles. User testing for these accounts started in 2021, but the finalised system design as at November 2021 has not yet been published.
Will I be able to view older records for dissolved companies?
Companies House will still retain company records for 20 years after a company has been dissolved, but older records will still only be accessible after making a request to Companies House and paying the required fee. In 2021 Companies House made available all dissolved records since 2010 available for free online (increasing the number of records freely available from the previous 6 years that was provided for free).
Will company incorporations become more complicated?
The incorporation process will be primarily affected by the requirement for company directors to have to verify their identity with Companies House before they can incorporate. However this can be done before the incorporation process begins and as most companies have only one director on incorporation it is anticipated that most companies will still be incorporated within 24 hours.
Proposals have also been made to provide Companies House with the power to query and potentially reject company names before they are registered, or remove a company name after registration. It has been highlighted that further consultation is required in this regard before final decisions are made.
Will records of company accounts or changing the accounting reference period be affected?
Accounts may be categorised to help determine whether a company is small, medium or large. Further data will be requested by Companies House to ensure eligibility for the right type of category when filing accounts. The reforms also envisage enabling digital submission of all accounts types. Shortening an accounting reference period will only be permitted once every five years, and if the reference period is being shortened to align with a holding or subsidiary company, Companies House will require the name and company number of that related company.
What about companies that are exempt from PSC requirements or owned by relevant legal entities that are exempt?
The responses to the consultation in their majority recommended that additional information be requested from companies that are exempt from PSC requirements as there was some concern that such exemptions could be falsely claimed by companies. The most common suggestions for additional information that should be requested were, for example, a hyperlink to the company’s market listing or registration information, the name of the market where the company shares are traded or alternative evidence of the company being listed on a main market to clarify why they are exempt.
What is the anticipated timeframe before we see these reforms come into effect?
The Government hasn’t given a specific timeframe, only that it proposes to legislate when Parliament is able to review the proposals and it is pushing for reform as suggested by the published responses to the consultation. Therefore it will be years, rather than months, before we see these changes come to fruition.
Although the reforms seem to be effecting further administrative burden on companies and individuals, it is encouraging to see that the primary focus of the reform is to streamline many of the processes we are familiar with. The response to the consultation suggests that ultimately the reforms will (perhaps subject to some initial teething problems) reduce complexity, increase protections around personal data and potential for fraud and provide comfort that the information available at Companies House is reliable and more accurate than with the existing system.
For further information on the anticipated reforms or to find out about our Company Secretarial service to assist you with filings at Companies House and your statutory registers, please contact our Corporate team.