The Government "Corporate transparency and register reform white paper", published in February 2022, is the culmination of three consultations that took place between the final quarter of 2020 and that date. These consultations looked at the powers of the Registrar, a potential ban on corporate directors, and how to improve the quality and value of financial information held on the Companies House register. These changes represent the single greatest change to the Registrar since its inception, in 1844, and will impact all entities that are registered at Companies House, as well as their directors, secretaries and persons with significant control.
At 125 pages, the final White Paper from the Government on the future of Companies House details 58 reforms under six headings. A summary of the findings are laid out below. The majority of the provisions will apply to Limited Liability Partnerships and Limited Partnerships as well as to companies.
- Transforming Companies House
In order to be able to action the Government's reform measures, Companies House will need considerable investment to be fit for purpose, both in terms of systems and people.
- The role and power of the Registrar of Companies
Companies House will be empowered to query new filings and reject filings if appropriate, as well as query information already on the register. The purpose of the power is two-fold: it will improve the accuracy and integrity of the register, as well as being able to identify potentially erroneous, fraudulent or suspicious information.
As well as the above power, Companies House will also be given powers in other areas, such as the power to remove material from the register in certain circumstances and to close loopholes in provisions around registered office addresses.
- Identity verification and other measures relating to directors, beneficial owners and agents
In order to enhance transparency of controllers and owners of businesses on the register, Companies House will introduce mandatory ID verification for directors, company secretaries, people with significant control and others associated with those entities, such as their agents. Once verified, that user can submit filings to Companies House. A person cannot be a director of a company unless they are verified in this manner.
The Government intends to limit corporate directorships (where a company, rather than an individual, sits as a director), in order to increase transparency around who controls, and ultimately owns, any entity on the register. It is anticipated that corporate directorships will be limited to entities registered in the UK, and all directors of that corporate director will need to be ID-verified natural persons.
- Enhanced data sharing
Companies House will be given the authority to proactively pass on data collected, where relevant, to certain other bodies, such as law enforcement, regulatory bodies and anti-money laundering supervisors. There will be strict criteria put in place around this data sharing.
The Registrar will also be provided with power to cross-reference the data it holds with certain other bodies, both public and private, again in accordance with strict criteria.
- Preventing abuse of personal information on the register
Given the additional data that Companies House will be collecting, public access to this data and the transmission of data to certain other bodies, it is essential that measures are put in place to prevent the abuse of this data, and to protect personal data where necessary.
Measures will be brought in allowing applicants to request the suppression of certain particulars, where an individual is at risk of harm. An example given in the Government's paper is the suppression of the address of a women’s refuge. Evidence will be required as to why the data to be suppressed is "sensitive".
The Government also plans to make available information around dissolved companies for 20 years after their dissolution.
- Improving the financial information on the register
Companies House will require all financial statements submitted to be in Inline Extensible Business Reporting Language (iXBRL) format, fully tagged. Accounts in this format are currently accepted by Companies House should filers wish to file in this format instead of a paper set of financial statements, and most companies are required to include a set of accounts in this format when filing their returns with HMRC.
Reduced filing options for small and micro companies are set to be removed, and entities of those sizes will need to file their full financial statements at Companies House.
You can find out more about the changes, and what they will mean for you and your clients, in our free Guide "Preparing for Change", available here. The full text of the Government’s White Paper can be found on their website.