Corporate transparency and register reform

On 28 February 2022 the Department for Business, Energy & Industrial Strategy (“BEIS”) published a white paper setting out the Government’s position in relation to proposed reforms to Companies House to improve Government priorities in national security and anti-corruption, fraud and boosting enterprise.

The proposed reforms cover the transformation of Companies House, setting out new powers for the Registrar of Companies; implementing identity verification for directors and third party presenters of information; giving improved privacy protections for those whose data is held on the public record; and improving the quality of financial information on the register.

Role and powers of the Registrar

The following powers will be given to the Registrar:

• A new role in promoting and maintaining the integrity of the register kept at Companies House, to better capture economic crime and other activities that may undermine the integrity of the register. This will include a new power to query and check information submitted, with a power to reject and query new filings, as well as to query information already on the register. If an entity fails to respond to a query, or fails to provide sufficient evidence in its response even after being asked for more, the Registrar will be able to take a number of actions, including if appropriate imposing a sanction on the entity.
• The power to reject a filing, which brings about change to the proper delivery requirements. This power will allow the Registrar to reject a document that, in their opinion, may cause harm to the register, even where it meets all other proper delivery requirements.
• A discretionary power to remove material which impacts upon the integrity of the register.
• A discretionary power to change the address of a company's registered office where the Registrar is satisfied that the company is not authorised to use the address.
• Identity verification and other measures relating to directors, beneficial owners and agents.

Identification and verification measures

Measures to be introduced include the following:

• All directors and their equivalents for other entities registered with Companies House, alongside people with significant control (PSC), will be required to verify their identity with Companies House. This will apply to any corporate body subject to the disclosure requirements of the Companies Act 2006. All members and PSCs of limited liability partnerships will be required to verify their identity, as will the general partners of limited partnerships.
• All new and existing company directors (and equivalents for other registrable entities), PSCs as well as any third-party agents submitting filings will need a verified account at Companies House.
• A director will be able to verify their identity either before or during their registration process at Companies House. A director who has not registered at Companies House by the end of the requirement registration period will be committing an offence and may also be liable for a civil penalty.
• For corporate members of LLPs or corporate general partners of LPs, the corporate person will have to provide the details of their director(s) or a managing officer, whose identity must be verified. Registrations of corporate persons that are not accompanied by a verified person in a management position will be rejected.
• To help improve the reliability of information on who is filing information on behalf of companies, all presenters of information to Companies House will be required to verify their identity. Such third parties will be able to conduct identity verification checks provided they confirm to Companies House that they are supervised by an appropriate body, and they must register with Companies House before they can be permitted to form companies or registerable partnerships or to file on their behalf.

Usefulness of information held

Proposed changes include:

• Information held on shareholders and PSCs is to be enhanced, in the first instance by introducing a requirement for companies to record full names for shareholders in their registers.
• Private companies, and traded companies where shareholders hold at least 5% of the issued shares of any class of the company, will be required to provide a one-off full shareholder list; this will be updated annually by way of disclosure via the confirmation statement filing, as is currently the case.
• Identifying and publishing more information from companies claiming any exemption from the requirement to provide details of their PSCs, including the reason for the exemption. Where a PSC is listed on a regulated market, the name of the market the company is listed on, and information that will direct searchers to where PSC information is published, will be required for publication at Companies House.

Enhanced data sharing

The white paper sets out a variety of measures to be introduced which will enable Companies House to share information with law enforcement, regulatory bodies and the private sector. Such sharing will be conducted only where it is proportionate and appropriate to do so, and under conditions identified in the paper.

Preventing abuse of personal information

The white paper notes that while the Government’s aim is to increase transparency of who is running UK registered companies, it is mindful that such transparency should not become a mechanism for abuse and that information is only displayed publicly if it is necessary and appropriate to do so.

The proposals aim to help encourage enterprise and entrepreneurship, as prospective directors will have greater confidence that their personal information will be safeguarded. In limited circumstances, directors and PSCs can currently apply to have some of their personal information held on the register suppressed from public view. The Government believes there is a case for extending these rights, in order to protect individuals from fraud and other harms, including in the most serious cases suppressing all of the required particulars in respect of an appointment or PSC.

Improving financial information on the register

In line with international best practice, Companies House will require company accounts to be filed in a digital format using the industry standard Inline Extensible Business Reporting Language (“iXBRL”), with such accounts being fully tagged. This means that each financial element within the accounts will need to be labelled appropriately, making the information easier to interrogate, compare and check.

The white paper notes that the Government has considered whether to reduce the time allowed for filing of accounts; however it has been decided that no changes are to be made at this time, appropriate changes to the law to facilitate future changes to improve the value of the register and bring the UK in line with international standards being made accordingly.

The Government has reviewed the filing options available to small and micro companies, and as a result, all small companies will have to file a profit and loss account and all the constituent parts of their accounts, so Companies House will receive a balance sheet and profit and loss account for all small companies including micro-entities. Small companies will also file a director’s report unless they meet the micro-entity thresholds, when they will still have the option not to prepare or file a director’s report. These reforms will enable Companies House to check eligibility and to categorise companies by size.

Dormant companies will be required to file an eligibility statement, which will provide the Registrar with additional evidence. This is intended as a deterrent for companies who under-report, and to improve the integrity of the data on the register.