ICAEW generally supports the proposals outlined in a report of September 2020 for Companies House to carry out ID verification checks on directors. However, it expressed concerns about the Companies House register becoming the definitive record of director appointments in lieu of the register kept by companies.
Charles Worth, Head of Business Law at ICAEW explains: “There is a risk that transactions such as mergers involving appointments and retirements of directors could be adversely impacted if these depend upon Companies House processing the changes immediately at any hour of night or day so, for instance, requiring there to be no system outages ever. We hope that BEIS will find a way to overcome this, whilst also meeting the needs of law enforcement authorities.”
In December 2020, BEIS consulted on whether the powers of Companies House should be extended, allowing it to conduct additional checks on account filings before they are accepted onto the register and giving it greater authority to scrutinize and reject them.
ICAEW said it supported initiatives designed to reduce criminal activity and increase reliability of the information on the register, including steps that will lead to better sharing of information between relevant authorities. However, the measures should be proportionate to avoid unnecessary burdens on business.
“It is important for the UK economy that businesses remain able to incorporate companies reasonably easily and with a high degree of certainty regarding outcomes. A balance therefore needs to be struck, and this will need to be explored further as the proposals are developed,” Worth says.
At the same time, ICAEW said it was not clear whether a lack of powers under the Companies Act 2006, insufficient resources or the way in which Companies House currently exercises its powers might be to blame for some of the problems the proposed reforms set out to address.
ICAEW has also responded to a separate consultation on the proposed ban on corporate directors that would require all company directors to be individuals, except for a corporate director which has only natural persons as its directors and their identity has been verified. Under current rules, only one director on a company’s board must be an individual and any number may be corporate directors.
In its response, ICAEW said the proposals strike a good balance between improving the quality or accessibility of information on the register to deter criminal use whilst allowing business some flexibility to use corporate directors for legitimate purposes.
However Worth expressed concern that the proposed controls may not go far enough: “Use of non-UK companies as corporate directors of UK companies is associated with higher risk and we are concerned that the proposed controls are not as robust in that context as Companies House is likely to have less control over ID verification and related matters,” Worth said.
ICAEW has also submitted another Companies House consultation response on ways to improve the quality and value of financial information submitted to Companies House after government analysis suggests that the company financial data it provides is currently worth up to £3bn per year to users and better information could make it easier for smaller companies to access funding.
Companies House will be presenting at a live ICAEW-hosted webinar for all members on 15 April at 10am. The event will provide background to the BEIS proposals, outline current thinking based on the responses received to its consultation and indicate the next steps.
- Register for ICAEW’s live webinar for all members talking through the practical implications of the Companies House proposed reforms, taking place on 15 April at 10am BST
- Read ICAEW’s submission to the consultation on Implementing the ban on corporate directors
- Read ICAEW’s submission to the consultation on the Powers of the registrar
- A summary of the Companies House reform proposals produced by ICAEW