The government has published its response to a consultation on reform of Companies House that will see the Registrar transformed from a largely passive recipient of information to an active gatekeeper over company creation and a custodian of more reliable data.
A BEIS white paper on corporate transparency and register reform published this week lays down the government’s plan for a legal overhaul of the register that will bolster Companies House’s powers and, the government says, allow it to meet the demands of a 21st-century economy, better tackle crime and fraud and ultimately provide a stronger foundation for boosting enterprise.
The Registrar of Companies (and equivalents in Scotland and Northern Ireland) will be given new powers to maintain the integrity of the register, including powers to query suspicious appointments or filings and, in some cases, request further evidence or reject the filing. Companies House will also have more extensive legal gateways for data sharing with law enforcement, other government bodies and the private sector, a move welcomed by ICAEW.
Meanwhile, a new requirement forcing those setting up, managing and controlling companies to have a verified identity with Companies House, or have registered and verified their identity via an anti-money laundering supervised third-party agent will make anonymous filings harder and discourage those wishing to hide their company ownership through nominees or opaque corporate structures. Directors will also have links to their appointments in one place.
ICAEW has said for many years that the ability for anyone to form a UK limited company – often in as little as 10 minutes for just £12 – with no requirement to prove who they are is a huge gap in the UK’s money laundering defences. It is strongly supportive of the forms outlined to close this loophole.
Michelle Giddings, ICAEW’s Head of AML, Professional Standards, said: “We are pleased that government is taking the next steps to deal with this chink in our armour – what is being proposed gets us to a place where the register is certainly more reliable and will help the accountancy profession in its role of gatekeeper too.”
Of particular interest to ICAEW members in practice is the increased ability to tackle the issue of accountancy firms being fraudulently registered. Mandatory digital filing and i-XRBL tagging will allow anyone to search information on the register much more quickly and easily. Firms can report suspicious filings to Companies House, who could challenge the filing and, if fraudulent, use enhanced removal powers to remove the information from the register.
Privacy mechanisms across the register will also be beefed up so that individuals can apply to have certain personal information made public on the register suppressed. Individuals who can provide evidence that having their personal information on the public register puts them at risk of harm can also apply to have it suppressed, the white paper says.
The reforms are supported by a series of changes to improve the financial information on the register, intended to lead to better financial management practices within SMEs, promote the transition to digital reporting, support better business and credit decisions, and help wider efforts to combat economic crime.
In a foreword to the white paper, Lord Callanan, Minister for Business, Energy and Corporate Responsibility, admitted that the flexible corporate registration framework provided by Companies House had been manipulated in a way that had allowed for the setting up of anonymous or fraudulent ‘shell’ companies or partnership that provided criminals with a veneer of legitimacy.
“This undermines our standing as a free, open and trustworthy democracy and undermines the UK’s reputation as a great place to do business,” Callanan said. However, he said the government was confident that the changes outlined in the white paper present a sensible and balanced way forward.
“Ongoing geopolitical events have reinforced the need to combat dirty money flowing into the Western financial system from former Soviet countries. And I am acutely aware that ordinary people continue to find themselves victims of fraud through no fault of their own due to the limitations of the current legislation,” Callanan added.
The reforms to Companies House are part of a package of measures that includes the introduction of the overseas entity register and changes to the Unexplained Wealth Orders and Sanctions Regimes. The government intends to introduce further legislation to tackle illicit finance and improve corporate transparency.
This will include new powers to seize crypto assets and bring them within scope of civil forfeiture powers; strengthened anti-money laundering powers to give businesses more confidence to share information on suspected money laundering and other economic crime; and reforms to the use of Limited Partnerships to prevent them being used as vehicles for facilitating international money laundering and illegal arms movements.
To deliver the government’s ambition, it has invested £20m to transform every aspect of Companies House skills, culture, operating model, and services, with a further £63m committed up to 2024/25 in the Autumn 2021 Budget.
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