Corporate Transparency and the Role of Companies House

Transparency when it comes to UK companies has been a growing issue over a number of years. Over the last month, there have been various news reports about Britain being amongst the money laundering capitals of the world, in particular in light of the recently leaked FinCen files.

One of the problems is that it’s very easy to incorporate a new company in the UK. For legitimate businesses, this is great. But, unfortunately, it’s also great for potential terrorists and money launderers.

To date, there is no requirement for identifiable people to be directors of UK companies. Since 2016, it has become necessary to identify individuals who have more than 25% control of a company, but there is no requirement for these identities to be independently verified, or for this requirement to extend to the directors actually running the company.

A consultation was launched last year by the government department for Business, Energy & Industrial Strategy (BEIS) on proposals to enhance the role of Companies House (an executive agency of BEIS, with whom all limited companies and LLPs in the UK are registered), in particular with the aim of increasing the transparency of UK corporate entities. The government has now responded to the consultation, including making the following proposals:

• Introduce a requirement for the identities of the following individuals to be verified at the time of incorporation: company directors, people with significant control (including, in each case, corresponding roles within LPs and LLPs), and those filing information on behalf of entities registered at Companies House.                                                                                                                                                                                                                                              Shareholders who do not fall within any of the above criteria will be exempt from having their identities verified.
• It is anticipated that third party agents will also be able to carry out the necessary ID verification, rather than Companies House having to deal with it all internally, but Companies House will still need evidence that the necessary checks have been carried out, and the third party agents themselves would need to be registered with Companies House as authorised agents
• Once established, the ID verification requirements will also be rolled out to all live registered companies, with a transitional period proposed to allow the necessary checks to be carried out.  After the end of the transitional period, any unverified individuals will face compliance action and/ or prosecution
• The Registrar of Companies will be given additional powers to query or reject any application for changes to be made to the public register, including on registration of a new company
• It will be made easier for certain filed information to be amended once published on the register.  Currently, other than in a few exceptions, court orders are required for a large number of changes, and it is proposed that this process is simplified

There is no current proposed timetable for implementing any of the above changes, and further comprehensive proposals will follow in due course. In the meantime, watch this space….