The UK has a global reputation for having an easy, quick and inexpensive process for setting up a company. However, this process is not without challenges and there is a growing concern that the UK’s system is being abused to facilitate fraud, including more recently, applications for emergency coronavirus loans that were made available to businesses.
Whilst reform was called for some time ago, the COVID-19 pandemic has highlighted how inaccurate the data can be at Companies House and why a reform is necessary, now more than ever before.
Increasing Corporate Transparency
On Friday 18 September 2020, the UK Government published its response to the consultation on the options to enhance the role of the Registrar of Companies and increase the transparency of UK corporate entities, in respect of the Corporate Transparency and Register Reform.
Under the reforms set out by the Department for Business, Energy and Industrial Strategy (BEIS), Companies House will have to verify the identity of any person seeking to file company information or register as a director, and such appointments may not be made until the necessary verification process has been completed.
There will also be an increase in the power of Companies House to query, investigate and ultimately remove false information from the register, although further information on this is yet to be provided.
The Benefits
The verification process is to be used for the appointment of company directors and the notification of relevant People with Significant Control (PSC). This process will apply retrospectively and therefore all existing directors and PSCs of all companies formed prior to the date of the new measures coming into place will also need to be verified. It has been said that a transition period will operate to allow companies the time to comply with the new measures.
The government hopes that these new measures regarding verification will increase the reliability of information provided at Companies House, giving a greater level of assurance to individuals, businesses and other institutions who will be dealing with one another. It is also envisioned that these verifications will assist law enforcement agencies within the UK to investigate fraud or money laundering in a more effective manner.
BEIS has stated that the identity checks will not delay the relatively quick and easy process that the UK is known for in relation to the formation of a company or making necessary filings. It is proposed that the ID checks will be carried out digitally with the aim of enabling companies to be incorporated within 24 hours.
The reforms will also include an obligation on any bodies that fall under the Anti-Money Laundering regulations to report discrepancies between any information they hold to any information available at Companies House.
The overarching aim of the new measures is to provide those relying on information held at Companies House with greater reassurance regarding the identities of the individuals they may be dealing with.
For assistance with the formation of a company, advice on meeting your filing obligations or any other company related matters, please contact our Corporate and Commercial Team on 0345 646 0406 or fill in our online enquiry form.