In May this year, Companies House announced plans to radical reform the register that will impact almost all companies in the UK. They have described it as the biggest change since the registry was setup in 1844.
The new plans were outlined in an 80-page document outlining detailed changes they will making but also changes that are still in debate. Companies had until 5th August to lodge a formal response with many larger organisations and bodies such the Association of Company Registration Agents doing so. Response to the public feedback has not yet been made available
What is Companies House changing?
The proposed changes to Companies House are far-reaching with almost no area untouched. Everything from certificates of good standing, to access to submitting records has been scrutinised and suggestion for improvements have been made.
The changes have been grouped into four categories:
Part A: Knowing Who Is Setting Up, Managing and Controlling Corporate Entities
Part B: Improving the Accuracy and Usability of Data on the Companies Register
Part C: Protecting Personal Information (Chapters 10 and 11)
Part D: Ensuring Compliance, Sharing Intelligence, Other Measures to Deter Abuse of Corporate Entities
Each category has several chapters with a total of 248 points of discussions. We've been through the entire document and while we can't provide a comprehensive analysis, there are certain key points that we'd like to highlight.
One of the objectives of the reform is to improve data sharing across governmental department in an aide to reduce anti-money laundering and fraud in the UK. In point 209 document states that Companies House is already sharing data with HMRC to explore any differences. Data sharing wouldn't be limited to just company data though it would also relate to director / personal information as outlined in point 73.
Greater verification of identities and company data
One of the big themes throughout the reform document is modernising the way companies, directors, shareholders and PSCs are verified. One of the results of making company data more available was that it highlighted its inaccuracies and incorrect reporting. As a result, there will be a requirement to provide a lot more information that is currently required.
Businesses will need to provide evidence that they are entitled to use an address as its registered office, information about their bank accounts and even more information on shareholders such as residential address and date of birth.
The registry acknowledges that the additional level of verification will cause much burden on individuals, especially shareholders, so it's suggesting that it may be voluntary for some. At the same time they are proposing a system whereby it will be made clear whether an individual has confirmed their details or not – kind like the blue ticks you have on Twitter. Not verifying your details could, therefore, have a negative impact on your business as it could be seen as deliberately hiding your identity.
Changes to certificates of good standing
Currently, a business can order a certificate from Companies House that includes a 'Good Standing' statement. These certificates are often used as evidence during legal or financial matters.
The reform wants to radically reduce the significance of these certificates as it states in point 247 'There are suggestions that holders of a certificate of good standing are using them as evidence that the company is financially sound.' Companies House want to remove any suggestion that they are making a judgement on the credibility of the business and are instead proposing they become 'a statements of fact derived from information filed.'
Why is Companies House making these changes?
In their own words, the registry has stated that they have suggested the reforms to
- Reduce anti-money laundering and improve transparency
- Better data sharing between government organisations
- More accurate and up to date records
- Reducing the abuse of personal information on the register
Over the past few years, the register has come under increased scrutiny and pressure to modernise to reduce the issues outlined above. We support any changes that will improve the detection of fraud, AML or other criminal behaviours. While at the same time, as a formation agent, we recognise the need to reduce the barriers to creating companies in the UK in order to attract investment and enable entrepreneurship. The balance between both objectives will be challenging, and we welcome Companies House's approach, which is one of consultation and communication.
When will the changes to Companies House come into effect?
There has been no detail given as to when any changes will come into effect or how changes will be made. The only reference to any implementation date is with section 253 where it states, 'Companies House will go through a major transformation in the coming years.' The document itself acknowledges that they do not have the current capabilities in place to roll out many of the changes they are proposing. The window to submit a response closed at the start of August, and we should expect further details being released shortly.