The Government’s goal of openness and transparency in UK corporates is again on the agenda with plans for Companies House reform. The plans will see Companies House play an expanded role in tackling economic crime and make it fit for purpose in a digital 21st century economy. Its role will evolve from being a mostly passive repository of information to a more proactive gatekeeper over company formations and custodian of better, more reliable data on companies and the people behind them.

A recent Government White Paper explains that, whilst Companies House is well regarded worldwide, recent years have seen a growing misuse of companies, concerns over the accuracy of the companies register and challenges safeguarding the personal data it holds. The Government asserts that the planned measures will help bear down on organised criminals that use opaque companies to abuse the UK’s financial system.

Plans include:

  • Identity verification Those setting up, managing and controlling UK companies and other UK registered entities will need to have a mandatory verified account at Companies House, making it harder for company ownership to be hidden through opaque corporate structures. This will include all new and existing directors, persons with significant control (or directors of relevant legal entities), members of LLPs and general partners of limited partnerships.
  • Suspicious filings Companies House will be equipped with new powers to maintain the integrity of the companies register, including powers to query anomalies and suspicious filings (ultimately rejecting filings if warranted) and inform security agencies of potential wrongdoing.
  • Corporate directors The long-standing plan to restrict the use of corporate directors in UK companies will be introduced, promoting transparency and making anonymous chains of corporate control a thing of the past. A company will only be permitted to retain/appoint a corporate director if all of the corporate director’s own directors are natural persons and they have been through the identity verification process. Corporate directors must be UK companies or registered entities; overseas corporate directors will not be permitted.

The government will consider whether any further restrictions should be imposed on the use of corporate members of LLPs and corporate general partners of LPs to mitigate the risk of their misuse, but, as things stand, any corporate member/GP will have to provide details of their own directors or a managing officer, whose identity must be verified.

  • Prevent abuse of personal information Individuals will have greater rights to ask for personal information to be suppressed and hidden from public view.
  • Improving financial information Industry standard digital only filings (using iXBRL) will be introduced with the Government exploring options to allow companies to file a single set of accounts for all relevant Government departments. There will be simplified accounts options for small companies and micro-entities, requiring a full balance sheet and profit and loss account, which will add to the administrative burden for some smaller businesses.

The planned reforms will be implemented via an Economic Crime and Corporate Transparency Bill and will form part of a wider package of legislative measures to tackle economic crime, including the recent headline-grabbing register of overseas entities (requiring those behind foreign companies which own UK property to reveal their identities), steps to help stop the use of limited partnerships as vehicles for facilitating international money laundering and illegal arms movements, and new powers to seize crypto assets more easily.

"The Economic Crime and Corporate Transparency Bill will tackle economic crime, strengthen our national security, and boost small businesses. Through the Bill, the government will crack down on the kleptocrats, criminals and terrorists who abuse our open economy. Stronger anti-money laundering rules, reforms to corporate law, and the biggest upgrade to the Companies House register in 170 years will root out wrongdoers so legitimate businesses can thrive."

 https://www.gov.uk/government/news/beis-in-the-2022-queens-s