It has been discussed for a number of years, but finally tougher rules are on their way to enable Companies House to strengthen corporate transparency and reform the company register. Details have been set out in a government white paper with enacting legislation widely expected to follow.
First the consultation
Changes in the way that Companies House fulfils its role as company registrar seem to continually be under review, with the latest scrutiny of their remit being the December 2020 consultation. This was a wide ranging exercise with no less than three separate consultations spanning proposals to reform the Registrar’s powers, a set of principles for the exceptions to the prohibition on corporate directors, and improved treatment of corporate financial information.
With the benefit of the consultation in hand, the white paper sets out the government’s position. An increase in the registrar’s powers were widely expected, with a new statutory function to promote and maintain the integrity of the register high up on the government’s priority list.
A new power enabling the registrar to query information before it is placed on the register, or even after it has been processed, marks a distinct departure from its current limitations. Interestingly all information currently on the register will be included within such scope permitting retrospective effect.
Companies House will be developing systems to assist the detection of suspicious activity although it is currently unclear whether these will be in place from day one.
Call me a number, not a name
One specific power to be introduced will be in connection with company names. Typically an area symptomatic of suspicious or fraudulent activity, particularly where there is an implication of false association, the registrar will be able to change a company name to its number unless its enquiries are satisfied. The powers of the Company Names Adjudicator are also due to be boosted.
Proof of identity
In order to protect the integrity of the register, a digital identity service is being developed to verify all those that submit information. Terms have yet to be finalised and it could be that a third party will be involved. It is hoped that this will cut down on fraudulently filed information.
Not only will directors and persons of significant control (PSCs) need to verify their identity, but the scheme will extend to all presenters of information to Companies House. Anything suspicious will be challenged with new powers to share information and notify security agencies.
Statement to the House
In his statement announcing the measures to the House of Commons, Business Secretary Kwasi Kwarteng stressed the government’s determination to address the abuse of corporate structures, particularly in the light of the situation in Russia. This is particularly relevant given that the white paper was unveiled alongside other measures including plans to reform limited partnerships law and new powers to seize crypto assets.
Although Companies House reform has been on the cards for some time there is no denying that the international situation has accelerated its introduction. Time will tell how soon the changes can be implemented, with a phased approach more likely given that some will undoubtedly be easier to enact that others.
If you require any guidance as to your obligations towards Companies House, please contact the Corporate department.