Extensive overhaul of Companies House regime and opportunity for you to express your views | Glasgow Chamber of Commerce
Gemma Gallagher, DWF
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Extensive overhaul of Companies House regime and opportunity for you to express your views

Gemma Gallagher, senior associate in DWF's Glasgow corporate team, provides a short legal update regarding the UK Government's proposals to improve the transparency of UK corporate entities by substantially enhancing the role of Companies House and amending current practice in order to improve the accuracy of information filed. 

Background

On 5 May 2019, the Department for Business, Energy and Industrial Strategy published a consultation paper seeking views from members of the public (but particularly company directors, shareholders and the wider business community) in relation to the biggest reforms of the Companies House regime since its adoption.

One key aspect of the success of the UK's business environment must relate to its regulatory framework, of which, since 1844, UK corporate entities have been required to provide information to a central register in order to provide transparency and accountability. At present, information is required to be filed regularly by corporate entities with the relevant Registrar of Companies (Scotland, England and Wales or Northern Ireland) supported by Companies House. Information submitted to Companies House is publicly available and in 2018 it was reported that companies data was accessed over 6.5 billion times – demonstrating the value of this free, accessible service.

Nevertheless, the current regime has received criticism on the basis that it is open to exploitation and information filed may not always be accurate. The BEIS consultation paper seeks to address these criticisms by enhancing the role of Companies House and consequently increasing the transparency of UK corporate entities.

Proposed reforms

The proposed package of reforms include:

  • authenticating the identity of directors, PSCs and other individuals filing information on behalf a company (i.e. those who have a key role in companies) and suggested methods of verification could include extensive verification processes similar to law firms' anti-money laundering checks or banks' customer due diligence procedures;
  • requiring additional details about shareholders (such as addresses and dates of birth) and additional filings to be made at Companies House following the transfer of shares. Filings would be required to be made within 14 days of the change in shareholder details as opposed to the annual update as part of a company's confirmation statement;
  • providing Companies House more discretion to verify and analyse data prior to its filing (for instance, the ability to seek further information in instances where a company claims an exemption from filing full accounts or to deter misuse of company names (eg. if the proposed name is misleading)) as well as remove incorrect information without the need for court involvement;
  • changes to company account filings including a uniform format for the submission of annual accounts and restricting the number of accounting year-end movements;
  • supressing historic personal information contained on the register to deter the chance of identity fraud;
  • limiting the number of director appointments that an individual can hold;
  • cross-checking data held by other government and private sector bodies (for instance HMRC in relation to annual accounts); and
  • other methods to deter abuse of corporate entities and notably, it is being considered whether companies should have to provide details of their non-UK bank accounts (it is not proposed for such information to be publicly available but details could be made available to other official bodies).

Do the reforms go far enough?

It is critical that the UK retains its global reputation as a trusted, transparent marketplace and the proposed reforms can only enhance the reputation of the UK corporate framework and give confidence to the wider business community and members of the public when dealing with UK corporate entities.

The developments would however require significant adjustments to the existing Companies Act 2006 and a complete overhaul of the current practices upheld by Companies House. It is assumed that the proposed reforms could impact both the cost and the timing of processing of documents (as currently a company can be incorporated on a same-day basis and a director can be appointed electronically within an hour) and the extensive reforms will undoubtedly take years to implement.

Next steps

Whatever the outcome of the consultation, any proposed changes to the current regulatory regime will have substantial practical implications on not only UK corporate entities but also those who have responsibility for administering companies in the UK i.e. officers, investors, advisors and third party agents.

Members of Glasgow's business community should take the opportunity to submit responses to the consultation and they have until 11:45pm on 5 August 2019 to express their views – for more information and to respond, please click here.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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