What are the proposed reforms to Companies House?
In February 2022, the Government published its Corporate Transparency and Register Reform White Paper.
The White Paper discusses the current roles of Companies House, the case for change and the proposed reforms.
The current position
The key roles of Companies House are to:
- facilitate the incorporation of limited companies (and other types of entities); and
- provide publicly available information on those companies / entities without charge on the Companies House register (‘the Register’).
The Registrar of Companies in England and Wales has power and control of Companies House, which is an Executive Agency run by its staff under the Department of Business, Energy and Industrial Strategy.
As at the time of the White Paper, there were 4.4 million active companies registered with Companies House. In 2020/2021, there were 10.2 billion searches of the Register.
The case for change
The economic landscape is now very much a digital one.
The current framework has enabled fraudsters to take advantage by creating virtually anonymous shell companies to assist them to commit financial crimes and identity theft.
The case for change is to prevent such abuse and to enable a dependable system for both domestic and international businesses to incorporate entities in the UK.
The proposals for reform
Whilst filings can already be made online to change the Register, rather than just receive information and publish it, Companies House will become a more active gatekeeper in relation to company formation and a custodian of more reliable data.
The proposed changes are to introduce:
- identity verification on incorporation and filing
- discretionary powers to raise queries or remove information
- corporate directors
- transparency of ownership
- improved financial information
- a register of overseas entities
The reform will be both legislative and operational and designed to help safeguard national security and to prevent proceeds of crime coming into the Western financial system as well as helping to protect innocent, ordinary people from becoming victims of fraud.
Whilst a budget of £63million was set aside by the Government in its Autumn 2021 budget (page 114) to implement the reforms, there is no set timescale.
There are a number of issues that can and do arise given the state of the current system. Saunders Law are adept at dealing with such issues and our work includes a recent instruction to apply to court for an order compelling Companies House to rectify the Register following fraudulent filings resulting in the fraudster appearing instead of the innocent party on the Register as the sole director and shareholder of a Company – putting the company’s assets at risk.
The reforms (particularly the identity verification and discretionary powers to remove information) would hopefully remove the opportunity for the fraudster to succeed in the above scenario and would form a barrier of protection for the innocent party and the company’s assets. It could also prevent the need for the innocent party to incur the costs of issuing court proceedings – which in turn would reduce the involvement of the court’s already limited resources.
If you wish to discuss fraudulent or incorrect filings made with Companies House, get in touch with us on 020 7315 4801 or make an enquiry with our team.