Key changes ahead which no director can ignore

2021 could finally be the year when Companies House builds on its role as company registrar and dips a toe into the waters of becoming a company regulator, at least of sorts.

Three new consultations are set to pave the way to allow the organisation a more pro-active role in improving corporate transparency and cracking down on company fraud.

We were warned

Such direction of travel comes as little surprise. Back in September the government announced a series of reforms to clamp down on fraud and money laundering. Amongst these are a requirement for directors to prove their identity with appointments subject to Companies House digital verification. This, according to the announcement at the time, would improve the ability of law enforcement agencies such as the National Crime Agency to trace activity for suspected fraud or money laundering.

Similarly, the government made it clear that Companies House should have greater powers to query and reject information. This marks a significant shift from the registrar’s current approach of taking valid submissions “in good faith” to one of questioning data being provided to them. Whether or not this achieves the stated goal remains to be seen, as will how systems can be implemented to avoid an unmanageable number of false queries.

Further consultations

Moving matters along and three new consultations were launched in December in support of the reforms and greater powers for Companies House. They tie in several related themes and, if adopted, all will have consequences for current and future company directors.

Corporate directors

A Company’s power to appoint another company or legal entity to act as a director who is not a real person has been under pressure in recent years. Any remaining ability to do so looks set to be eroded further with an outright ban on the practice unless the particular corporate appointed to the board is one where its own directors are all natural persons that have had their own identities verified. This is set to work in conjunction with planned new powers to require identity verification.

Registrar turning regulator

Of the three consultations this is probably the most significant in terms of the future role that Companies House is set to play in the UK corporate landscape. It sets out how the registrar’s powers could be strengthened in a range of areas, including amending, or removing information from the public register.

A major criticism of the way in which the Company register currently operates is the limited power for Companies House, or for a third party for that matter, to require removal or amendment of false or misleading information without the sanction of the court. If adopted, it would shift power into the hands of the registrar. Companies House has said that it will exercise any new powers to query information presented to it on a “risk based” approach and it is likely such a policy will develop over time, although it has cautioned that court approval will still be required where submissions take legal effect upon registration. 

Accounting for change

The final consultation is intended to address the unusual practice of the same accounting information being sent to both HMRC and Companies House. So, a move towards filing “once with government” in a digital format would streamline the process.

Other changes being suggested include shorter filing deadlines to increase the relevance of accounting information, simplification of the requirements for smaller entities, and greater checking of information presented to the registrar.

The consultations close on 3rd February 2021.

More information

Pinney Talfourd are experts in Company & Commercial Law and can advise you on changes to the law so you are given up to date advice. Please do not hesitate to contact Edward Garston by email or on 01277 246833 should you wish to discuss anything further.

This article was written by Edward Garston, Partner in our Company & Commercial Team. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of January 2021.