The Department for Business, Energy & Industrial Strategy (BEIS) has just published a detailed consultation (the Consultation) on options to enhance the role of Companies House and increase the transparency of UK corporate entities.

The Consultation can be read in full here.

The potential reforms proposed in the Consultation are being presented by the Government as “the biggest changes to the UK system for setting up and operating companies since the UK company register was created in 1844…”. One should expect detailed primary legislation in due course (although given the legislative chokehold created by Brexit, it is difficult to conceive precisely when this will be).

What is driving this?

The Government is plainly concerned about corporate bodies being registered in the UK without the identity of the directors or ultimate owners of such bodies having been verified. As the law currently stands, only regulated persons (typically law firms, accountants and company secretarial providers) are required to verify the identity of corporate bodies and those behind them before registering the corporate bodies at Companies House. This means that there are a significant number of corporate bodes being registered by individuals or other unregistered “presenters” without any form or verification having been conducted. The Government surmises, sensibly, that this facilitates the laundering of criminal property in the UK through such corporate vehicles.

The consultation also notes that the historic function of Companies House has been to record information and not verify it. This has enabled criminals to provide false or no information to Companies House about directors, shareholders and PSCs, thereby largely making a mockery of ex-Prime Minister David Cameron’s much-vaunted wish to shine a light on economic crime being perpetrated in the UK through the medium of UK corporate bodies.

As a starting point, BEIS expects the new provisions to apply to any corporate body subject to disclosure obligations under the Companies Act 2006. This means private and public companies, unlimited companies, unregistered companies, overseas companies, limited liability partnerships and limited partnerships would all be caught.

What are the main proposed changes?

The main changes to the current regime contemplated by the consultation include:

• Verifying the identity of Individuals who have a key role in setting up companies; this could include presenters, directors, PSCs and shareholders;
• Extending the powers of Companies House to query and seek corroboration on information before it is entered on the register;
• Imposing obligations on regulated entities (law firms, accountants and company secretarial providers) to report anomalies in the information they have about corporate bodies they have registered to Companies House;
• Limiting the number of directorships that any one individual can have.

Comment

These changes, if implemented, would probably result in the UK having one of the world’s most robust anti-money laundering regimes applicable to the formation of business organisations. However, apart from the challenges of implementing any new primary legislation of this magnitude in the current febrile political climate, the changes will necessarily require significant investment in systems, personnel and training at Companies House, including the protection of the enhanced data that will be collected and processed as a result of the changes. The consultation closes on 5 August and we will be monitoring its progress closely.

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