The UK government has proposed several changes to Companies House protocol with the aim of increasing corporate transparency and reducing fraud. Companies House is the UK's official register of companies and is responsible for maintaining an accurate record of all registered companies. The proposed changes are designed to improve the reliability and transparency of the information provided by companies. It aims to reduce the risk of fraud by helping businesses across the UK economy make better decisions about their suppliers and creditors.
One of the proposed changes is the introduction of a "verification" process which will require companies to provide proof of their identity before they can register with Companies House. Companies will be able to verify persons directly through Company House or through an Authorised Corporate Service Provider (ACSP). All businesses registered at Companies House will have at least one fully verified natural person directly associated with them on the public register. Verification directly through Companies House will be by simply persons taking a photograph of their face and their identifying document and the two will be compared via likeness matching technology. If successful, the person will be notified, and their identity will be verified in a matter of minutes. Alternative methods will be available for those persons who cannot use the digital identity verification system.
The ACSP route will involve using an intermediary such as an accountant, legal adviser, or company formation agent to assist you in completing the verification process. The verification process will help to reduce the risk of fraud and improve the creditability of information provided by companies. For those using the register to search for potential suppliers or partners, it intends to provide greater assurance that the people behind the company are who they say they are.
Another proposal is that it will introduce a requirement that companies are now to record the full names of shareholders in their registrars. It seeks to make it easier to trace persons associated with companies and allow users more accurate information of persons associated with businesses. So now persons will no longer be able to identify as J Smith, persons will have to give their full name, i.e., Jane Smith. In addition, private companies, and traded companies where shareholders hold at least 5% of the issued shares of any class of the company, will be required to provide a one-off full shareholder list.
Once the reforms come into effect, directors of new companies will need to comply with the verification procedures before an application is made to form a new company. There will be a transition period for existing companies and other registrable entities to comply with the new identity verification requirements. However, those who do not comply by the end of the period will risk facing criminal sanctions and civil penalties. It is believed that the verification procedure will be a one-off requirement, once a director is authorised they will not need to repeat the process for any additional companies that they are or become a director of.
The reforms are expected to take effect in Spring 2023, but this is yet to be confirmed. Companies can begin to take steps to prepare for the changes now by checking that at least one of their directors is a natural person i.e. a human being rather than a company. You should act as soon as possible if this is not the case as existing legislation also imposes this obligation upon companies.
In conclusion, the government is introducing measures to improve transparency requirements to increase the usefulness of the information held on the shareholders of UK companies. These measures will mean that users of the companies register will have more certainty on who they are doing business with, build confidence in the integrity of the companies register, and prevent bad actors from exploiting the register.
At Clapham and Collinge, we can assist in the process of appointing new directors in advance of the reforms.
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