BEIS consults on major Companies House overhaul

The Department for Business, Energy and Industrial Strategy (BEIS) has launched three consultations on reforms to Companies House, designed to improve the integrity of the information available about companies and strengthen its ability to tackle fraud

Under the new proposals, directors cannot be appointed until their identity has been verified and the register’s powers will be expanded so that it can query, investigate and remove false or inaccurate information.

The latest consultations examine the practicalities around specific concepts which were previously consulted on more generally in Corporate Transparency and Register Reform Consultation which reported its findings in September.

The first looks at the introduction of a discretionary power to query and check information before it is placed on the register. This means the registrar will no longer be obliged to accept documents where there is a reason to query the information provided, for example if they believe the use of a registered office address may be fraudulent.

This power can be exercised in cases of identified ‘errors and anomalies’ and will be applied on a risk-based approach. There are currently over 4.35m companies on the register and Companies House incorporates over 665,000 companies per year, so challenging every submission would not be practical.

The categories of information that can be removed under this power will be widened to cover any non-legal effect document and some legal effect filings. The consultation examines the process followed before information is removed, saying it should be reviewed and updated to make it more responsive to individual circumstances.

The consultation also looks at closing other gaps in legislation, so that Companies House will have the power to refuse changes of name in cases where a company has been ordered to change its name but then reverts back to the offending name.

Finally, it considers plans to remove the requirement for companies to keep and maintain their own register of directors and to notify the registrar of any changes. This would reduce the burdens on business and removes the chance of discrepancies emerging and improves the integrity of the public register. Using this approach, the public register of companies will become the single, verified source of information with respect to directors.

Digital filing

The second consultation invites views on changes which could mean that in future companies might be able to file accounts once only with government, instead of separately to Companies House, HMRC and other agencies.

It also considers the filing options available to small companies with the aim of achieving a better balance between minimising burdens and ensuring the information provided is valuable.

Under the proposal, all companies would file accounts digitally with Companies House in a machine-readable format, bringing the UK into line with global best practice. Tagging standards would be expanded to make comparison and bulk analysis of accounts simpler for investors and assist businesses seeking investment.

This approach would also tackle fraud and error by closing known loopholes in filing requirements and address problems of companies filing the wrong set of accounts; improve the quality and value of information on the register by reviewing the timescales for delivering accounts and exploring options to improve how information is displayed; and require additional information to be submitted with accounts to improve their statistical and analytical value.

The consultation notes that HMRC is currently consulting on the principles for the design of Making Tax Digital for corporation tax. The consultation addresses areas of shared interest, such as the alignment of filing and accountancy dates, XBRL tagging and company accounts and tax online (CATO) software. Companies House will work with HMRC to understand their consultation responses and consider opportunities to jointly develop future proposals.

Corporate structures

The third consultation looks at proposals to tackle opaque corporate structures, with corporate directors prohibited unless their own boards comprise all natural persons, and those natural persons have their identities verified.

At present the law only requires that one director on a company’s board be a real or ‘natural’ person and any number may be what are termed corporate directors, i.e. other companies or legal entities. The government wants to consider whether UK companies should be prohibited from appointing these corporate directors to their boards as is the case, for example, in Germany and the US.

Provision to prohibit the use of corporate directors was taken in the Small Business, Enterprise and Employment Act 2015 (SBEEA 2015) which includes both a transitional phase of 12 months, on commencement of the provisions, within which companies must adapt to achieve compliance, and scope for the government to define exceptions so that companies might, in prescribed circumstances, continue to make use of corporate directors.

A fundamental element of the reforms is the concept of a new mandatory identity verification process for company directors.  The consultation makes clear that this will proceed but says the government is  conscious that the coronavirus pandemic has meant new and unforeseen challenges for many companies, and will ensure that the timetable for introducing new requirements around corporate director appointments is sensitive to those additional pressures.

Lord Callanan, minister for corporate responsibility, said: ‘Today’s proposals set out further detail on our far-reaching reforms to ensure the Companies House register is fit for the 21st century – allowing us to crack down on fraud and money laundering, while providing businesses with greater confidence in their transactions.’

The deadline for comments for all three consultation is 3 February 2021.

Useful links:

Corporate transparency and register reform: powers of the registrar

Corporate transparency and register reform: improving the quality and value of financial information on the UK companies register

Corporate transparency and register reform: implementing the ban on corporate directors

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

View profile and articles

Average: 5 (2 votes)

Rate this article

Related Articles