The work and practices of Companies House, the repository for all information on the majority of the UK’s companies and similar registered entities, is under review. A business is started in the UK every 75 seconds and we are home to five of the top ten fastest-growing businesses in Europe. Technological developments and increased reliance on information for credit and referencing purposes mean that what we access from Companies House is becoming ever more business-critical.
And for vets working for corporate rather than “retail” clients, knowing who the customer is will be central to getting paid. While retail clients pay cash, vets working for corporate clients will invariably be paid in arrears, and on invoice submission. They’re offering credit to clients making it critical to understand their financial viability. As a number of high-profile retail failures have shown, even the biggest of firms get into trouble. Many firms rely on information from Companies House to understand the viability of their clients; the problem is, at present, much of that information is not much better than a work of fiction, and there are four major areas for concern which need to be amended.
Accordingly, in May, the Department for Business Energy and Industrial Strategy issued a consultation about options to enhance the role of Companies House and increase the transparency of UK corporate entities. Responses to the proposals were required by 5 August 2019.
Knowing who is setting up, managing and controlling corporate entities
Most UK companies are legitimate; however, some are misused by international criminals and corrupt elites for money laundering. The government is proposing that individuals who have a key role in companies should have their identity verified. This would apply to company directors, People with Significant Control and those filing information.
Improving the accuracy and usability of data on the companies register
From 2015, almost all information at Companies House has been accessible online, free and without delay. However, there are cases of false information being filed, whether by accident or deliberately. These include fraudulent audit reports, where companies falsely claimed that their annual accounts had been audited by well-known audit firms.
There have been a series of proposed reforms that would deliver better quality information on the register – including extending the powers of Companies House to query and seek corroboration on information before it is entered on the register and making it easier to remove inaccurate information. In addition, the government has proposed improvements to the process and delivery of annual accounts to Companies House. The government intends to maintain the current approach to retaining records of dissolved companies on the register for 20 years from dissolution.
Protecting personal information
Not all personal information is made publicly available and the government has taken action to protect directors’ information. Nonetheless, company directors are a target for, among other things, identity theft.
The government has outlined how Companies House will store and control access to information, how personal information will be stored and accessed, and the circumstances under which it may be disclosed and to whom if its proposals are adopted. Under identity verification proposals, access to the register will be carefully managed, allowing only identified or authorised persons to file information. New processes are proposed for sensitive information to be protected. Proposals to allow directors some additional rights to suppress their information from public view have also been set out.
Information on the register should be of real, practical use to those who wish to find out information about those taking advantage of the privilege and protection of limited liability. At the same time, it is recognised that information on the register should not become a tool for abuse and so information of a sensitive personal nature will not be made publicly available.
Measures to deter abuse of corporate entities
The limited nature of cross checks between Companies House and other public and private sector bodies can be abused by persons who report one set of information to Companies House and different information to other agencies and private sector bodies.
Companies House data on UK corporate bodies could be improved through cross checks against data held by other government and private sector bodies. The government wants to see the exchange of intelligence made easier in order to enable greater sophistication in identifying possible criminal behaviour. This will lead to faster identification of anomalies between data at Companies House and elsewhere. It will deliver a more effective link between different company records on the register and provide those searching the register with faster access to better information.
The proposals set out how Companies House will work with other agencies to ensure compliance and take action against offenders. It also proposes additional measures to further deter abuse of UK-registered corporate entities.
The routine cross-checking of information against external data sets and powers to obtain feedback from obliged entities on discrepancies identified is proposed alongside adopting a new risk-based approach to the sharing of intelligence with law enforcement agencies and requiring companies to provide details of their bank account.
Implementation
If implemented in full, this would amount to the most significant reform of the UK’s company registration framework since a register was first introduced in 1844 and go to the core of the Companies Act. There are significant implications for Companies House’s operating model and app-roach. All the services it provides will need to be modernised and transformed to improve its service to customers.
There will be an impact on the fees levied by Companies House, though the government fully expects them to remain very low by international standards.
On completion of the programme Companies House will be a truly digital organisation, inside and out; its services will be simple and easy to use, allowing customers to interact with it using the latest technology. It will be better able to respond to broader challenges and adapt to changing needs. This, in turn, will mean Companies House is able to better support wider government policy on corporate transparency and tackling financial crime.
As they say, it is always better to aim for the stars. Making the UK a better, safer place to do business is an excellent and worthwhile ambition; the hope has to be that the watchdogs who will be manning the fort at Companies House will not be toothless and will have the wherewithal to help keep the majority safe.
