Increase in corporate transparency in 2020
You may have heard that in 2019 the government launched a consultation on proposals to enhance the role of Companies House and to increase the transparency of corporate entities in the UK.
The government is currently analysing the results of the consultation and will be providing us with their feedback soon (likely in the next month or so).
So, while we await their announcement, please see below for a run down of what’s happening and why.
Why was the consultation carried out?
In recent years, concerns have arisen that the UK's corporate framework is open to misuse. These concerns stem from the misuse of UK registered entities by international criminals and corrupt elites; false information being filed; the abuse of personal information on the register relating to directors; and from the limited nature of cross checks between Companies House and other sector bodies.
The proposed reforms aim to improve the accuracy of information on Companies House and to strengthen the UK's ability to combat economic crime.
What are the government’s proposals?
The proposals fall into five parts:
1. Knowing who is setting up, managing and controlling corporate entities
The proposals here would mean that individuals who have a key role in companies (e.g. directors, PSCs and those filing information) would have their identity verified, not only on incorporation but throughout the lifetime of the company.
It will be an offence for a registered company to appoint a director whose identity has not been verified, and PSCs must verify their identities or face sanctions for non-compliance.
Shareholder’s will need to provide their name, usual residential address and date of birth (or, if a corporate shareholder, the company name and registered or principal office). This information will have to be updated within 14 days of any change in shareholder details (but if a listed company, this information will only be needed in respect of shareholders holding at least 5% of shares in the company).
Similarly, if the person filing information is unable to verify their identity then Companies House will not accept the filings.
2. Improving the accuracy and usability of data on Companies House
The government is seeking to extend the powers of Companies House to query and request corroboration of information before it is entered on the register, as well as making it easier to remove inaccurate information from the register.
They are seeking to develop the functionality of the Companies House systems so that suspicious activities can be better identified on the register.
For example, numerous companies are shortening their accounting reference periods in order to gain additional time to file accounts, so the government has proposed to limit the number of times a company can shorten its accounting reference period.
3. Protecting personal information
Whilst the government proposes to extend the amount of information that companies and individuals associated with them must provide, the intention is that very little of this information will be publicly available on the register.
The current proposals are for two tiers of access to non-public information: the limited rights enjoyed by credit agencies and the broader access available to public authorities as well as sharing information with law enforcement officials on a case by case basis.
The proposals also include removing the requirement for directors to provide information about their occupation; allowing directors to apply to have the day of their date of birth suppressed on the register (if filed before October 2015); allowing a person who has changed their name following a change of gender to apply to have their name hidden on the public register and replaced with their new name; allowing people to have information about a historic registered office address partially suppressed where it is their residential address; and allowing people to apply to have their signatures suppressed on the register.
4. Ensuring compliance, sharing intelligence and other measures to deter abuse of corporate entities
The government is exploring ways in which Companies House can collaborate with its law enforcement partners and compare its data against those held by other public and private sector bodies, to identify anomalies and suspicious activity.
It will require regulated entities to report anomalies they identify on the register to Companies House, as well as requiring companies to file details of their bank accounts with Companies House. A new filing requirement has been proposed for UK companies to notify Companies House within 14 days of a non-UK bank account being opened for the company which, if implemented, would require the company to provide the name of the bank, the address of the branch and the account number to Companies House.
The government also proposed a cap on the number of concurrent directorships that an individual can hold and a change to certificates of good standing to reflect that the certificate represents statements of fact derived from information filed, rather than a judgment that Companies House is making.
Implementation of these proposed changes is likely to start in 2020 but may take several years to complete. Companies House charges are also likely to increase in the foreseeable future due to the proposed changes, although it is anticipated that they will remain low by international standards.
What you can do to prepare?
If you want to know how best to prepare for these changes, please contact us and we will be well placed to provide tailored advice to you and your company.
Once the government has formally responded to the consultation, we will provide an update with which proposals have been adopted, so watch this space!
If you would like to discuss any of the issues raised in this article, or if you need any advice, please contact Sharon Percival or give us a call on 0345 070 6000.
Alternatively, click here to find out what our Corporate team can help you with.
This article was prepared by Harnaek Rahania.