On 5 May 2019, the Department for Business, Energy & Industrial Strategy (BEIS) published a consultation on proposals to reform company law. The proposal covers a wide range of measures which, if implemented, would see significant operational and legislative changes to company law, impacting new and existing businesses. The main aims of the proposal focus on enhancing the role of Companies House, increasing the transparency of UK corporate entities and strengthening the UK’s ability to combat economic crime.
The proposal has been split into a series of reforms that should help limit the risk of misuse of information on the companies register as well as ensure that it is verified and up to date. The reforms have been set out in five main parts:
- Knowing who is setting up, managing and controlling companies;
- Improving the accuracy and usability of data on the register;
- Protecting personal information on the register;
- Deterring abuse of corporate entities through compliance, sharing intelligence and other measures; and
- Knowing who is setting up, managing and controlling companies
The government wants greater assurance over the identification of individuals involved in the setting up and running of corporate entities. It is proposing that identity verification checks are made on directors, PSCs, presenters (those filing information) and shareholders both on incorporation and throughout the lifetime of a company. The law will be amended so that incorporation of a company is dependent on the verification of key individuals’ identities.
- Improving the accuracy and usability of data on the register
This part of the proposal is aimed at delivering better quality information on the companies register. As part of this reform, the government intends to extend the power of Companies House so that it is able to query and corroborate information before it is entered on the register. As a result, it will be quicker and easier for Companies House to remove inaccurate information. Company accounts, PSC exemptions and dissolved company records will also be more strictly monitored.
- Protecting personal information on the register
While the government proposes to extend the amount of information provided by corporate entities and key individuals, very little of this would be publicly available on the register. The register would be divided into two parts, with a front end that is publicly accessible to everyone, and a back end holding private information accessible only to Companies House.
- Deterring abuse of corporate entities through compliance, sharing intelligence and other measures
The government has proposed various measures aimed at preventing the abuse of corporate entities. This includes allowing Companies House to routinely cross-check information on the register against information held by other government and private sector bodies and obtain feedback on any discrepancies. Other suggestions include requiring companies to file their bank account details on the companies register, requiring companies to demonstrate that they are entitled to use an address as their registered office and capping the number of concurrent directorships that an individual can hold.
The final part of the proposal addresses the changes that will need to occur in order to implement the reforms. The proposed changes will require primary legislation and some major changes to almost every aspect of Companies House work. It will therefore take at least a few years for the government to deliver the proposals and Companies House fees are likely to increase, while still remaining low by international standards.
Although these reforms are likely to require significant time and financial investment, if implemented successfully, they would give the UK one of the most robust corporate anti-money laundering regimes in the world. They also address some of the longstanding issues embedded within the Companies House online system, and will hopefully improve the usability and accuracy of data on the companies register.
Due to the scope and nature of the proposed changes, BEIS are seeking the views of a wide cross-section of the public, including company directors, shareholders, the investor community, business representative bodies, other professional bodies, academics and members of the public generally. The closing date for responses to the consultation is 5 August 2019.