Details of the Corporate Transparency and Register Reform proposals and ICAEW’s involvement.
Background to the 2022 White Paper
The intended reforms outlined in the White Paper are the latest in a series of reforms intended to reduce use of UK companies for criminal purposes and increase the amount (and quality) of information disclosed about UK companies. Earlier measures include the introduction of the register of persons with significant control in 2015. More details of these measures can be found on our company law page.
The latest proposals will result in substantial change to the UK’s company law framework and the role of Companies House and have been described as the most significant reforms to the registration regime in 150 years. ICAEW particularly welcomes the introduction of identity verification for directors and others which should fill an obvious gap in the UK’s efforts to combat economic crime.
Many of the changes will apply also to LLPs and certain other bodies.
We summarise the latest proposals below.
The reforms will need to be implemented through legislation and operational changes. Draft legislation is awaited.
Summary of main intended reforms
The following outlines some of the key reforms that the government proposes taking forward under the White Paper. This is not comprehensive, and readers should refer to the White Paper for full details. Annex 1 to the White Paper contains a summary of the (58) envisaged reforms.
Introducing a new power for the Registrar to query information either before it is placed on the register or post-registration, on a discretionary basis using a risk-based approach. Companies House will no longer be obliged to accept documents that are delivered if there is reason to query the information provided and if a query is raised pre-registration, the filing will be rejected, and a reason provided. [ICAEW commented on the proposals in Rep 26/21].
Removing information from the register
Expanding the Registrar's existing powers to administratively remove information from the register so that the Registrar will have a discretionary power to remove material which impacts on the integrity of the register. [Rep 26/21]
Proper delivery requirements
Expanding the requirements for proper delivery so that further checks are conducted before a filing is accepted.
Power to change unauthorised registered office addresses
Providing the Registrar with a discretionary power to change the address of a company's registered office to the default address where the Registrar is satisfied that the company is not authorised to use the address or there is evidence that the address does not exist. [Rep 26/21]
Electronic delivery of documents
Conferring a new power to mandate electronic filing.
New powers for Companies House to query and prohibit use of company names (eg if suspicion of fraud). [Rep 26/21]
Sensitive words and expressions
Companies House to have discretion to consider other languages, abbreviations, or the use of other characters or punctuation when considering sensitive words or phrases. [Rep 26/21]
Identity verification and other measures relating to directors, beneficial owners and agents
Introducing identity verification into the incorporation and filing processes run by Companies House, requiring identity verification for directors (including directors of overseas companies), people with significant control (PSCs), presenters (that is, individuals filing information on a company's behalf), general partners of LPs, members of LLPs and directors of Relevant Legal Entities (RLEs). Companies House will have a digital identity service carried out by one or more third party identity service providers. Once verified, users will have one account that will be able to access all Companies House services, across all companies for which they are authorised to act, without having to reverify their identity each time.
There will be a transition period for existing companies and other registrable entities to comply with the new identity verification requirements. Those that do not comply by the end of the period may face criminal sanctions and be liable for civil penalties. [Rep 78/19]
Restrictions on corporate directors and corporate officers of registrable entities
Implementing the statutory ban on a UK company having corporate directors, with a principles-based exception. Corporate directors will be permitted if:
- all directors of the company seeking appointment are themselves natural persons; and
- those natural person directors are, prior to the corporate director appointment, subject to an appropriate identity verification process.
Corporate directorships will be restricted to entities registered in the UK.
Different requirements will apply for corporate members of LLPs or corporate general partners of LPs. For these entities, the corporate person will have to provide the details of their directors or a managing officer, whose identity must be verified. The government will consider whether any further restrictions should be imposed on the use of corporate members of LLPs and corporate general partners of LPs. [Rep 25/21].
Verification of third-party agents
Requiring third parties to confirm they are supervised and register with Companies House before they can be permitted to form companies or registerable partnerships, or to file on their behalf. They must submit evidence of the identity verification checks they are responsible for when they interact with Companies House.
The government will require all third-party agents to be registered and supervised in the UK, so that they are subject to the UK anti-money laundering regime. However, the government will have the power to allow third party agent registrations and filings from an overseas jurisdiction that is equivalent to the UK’s, and to amend that list as necessary. [Rep 78/19].
Information held on shareholders, PSCs and Relevant Legal Entities (RLEs)
Increased disclosures of shareholders, reasons for claiming an exemption from the requirement to provide details of its PSC and information on listing markets where applicable. [Rep 78/19].
Data sharing by Companies House
Registrar power to share data with certain bodies. Providing the Registrar with the power to proactively pass on relevant information to law enforcement and other public and regulatory bodies, when certain conditions are met. [Rep 78/19].
Increased discrepancy reporting
Requiring regulated professionals to report discrepancies they identify between information they hold on beneficial owners of companies and that held by Companies House [Rep 78/19].
Dissolved company records
Making all dissolved company records for the past 20 years freely available after legislation is introduced to allow individuals to request that personal information is protected where appropriate [Rep 78/19].
Improving financial information on the register
Enhanced validation checks on financial information. Introducing a requirement for company accounts to be filed with Companies House in a digital format using the industry standard Inline Extensible Business Reporting Language (iXBRL) and requiring the information to be fully tagged.
Simplifying the filing options available to small and micro-entities. There will be just two options: micro-entities accounts and small companies accounts. The options for abridged and "filleted" accounts will be removed. Small companies will be required to file all of the constituent parts of their accounts. [Rep 27/21]
Statement of eligibility for dormant company accounts
Requiring the filing of an eligibility statement with dormant company accounts in which the directors will confirm that the company is not trading and meets the criteria for filing dormant accounts. This is intended to provide the Registrar with additional evidence to take stronger enforcement action for false filings in future.
History of the White Paper reforms and ICAEW involvement
The White Paper takes forward several earlier consultations on which ICAEW commented (see ‘history’ below).
- corporate transparency and register reform (2019) and response (2020)
- banning corporate directors (9 December 2020)
- increased powers for the registrar (9 December 2020)
- improving the quality and value of financial information on the UK companies register (9 December 2020).
ICAEW responded to all the above consultations in the following representations:
- Rep 78-19, corporate transparency and register reform
- Rep 25-21, ban on corporate directors
- Rep 26- 21, increased powers for the registrar
- Rep 27-21, quality and value of financial reporting
We also participated the BEIS Working Group meetings leading to the White Paper. We broadly welcome the proposed reforms. In particular, the requirement for Companies House to perform verification checks will help to fill what is currently a significant gap in the UK’s AML regime and, on balance, we support the proposal to allow verification checks to be done by third party agents.
The reforms are important for ICAEW and its members, and ICAEW is well placed to provide valuable insights to Government on the subject.
ICAEW is the largest accountancy professional body supervisor in the UK, supervising around 11,000 firms in respect of anti-money laundering. We support Government’s determination to combat money laundering and proportionate company law reform to do so. Many of our member firms are structured as LLPs or companies and they will be directly impacted by increased verification requirements and related changes.
The services provided by many of our members include establishing companies for their clients or providing company secretarial services and these will be directly, and potentially severely, impacted by the proposals.
Our members are investors in, or directors of UK, companies of all sizes throughout the UK. The majority of FTSE 100 companies have an ICAEW member on the board. They reasonably expect the UK to have a company law regime that is both trusted and efficient (in terms of cost and meeting needs of business in a competitive world).
Our members advise over 3 million businesses on their affairs, including on various company law requirements. They look to Government to ensure that the law is clear and consistent and are conscious of the inefficiencies that arise where it is not.
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