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The UK Government has published its response to its consultation on reforms designed to enhance the role of Companies House and increase the transparency of UK corporate entities.

Originally launched in May 2019, the consultation was prompted by growing concerns regarding the exploitation of corporate entities by criminals, the inaccuracy of information on the register and the abuse of publicly available personal information. The proposals were described by the Government as “the biggest changes to the UK system for setting up and operating companies since the UK company register was created in 1844”.

Now, in his Ministerial foreword to the consultation response, Minster for Climate Change and Corporate Responsibility Lord Callanan wrote:

The same factors that make our framework successful make it attractive to exploitation. Too often I see companies repeatedly set up and closed down to avoid paying debts – so called “phoenixing”. Shell companies have been set up for no other purpose than to launder the proceeds of crime – committed both here and overseas. And we need to strike the right balance between transparency and protecting the personal information of the millions of people named on the register – from fraud and, in some cases, even more serious harm.

The Government’s response includes proposals on the following topics:

1. Verifying the identity of individuals

  • Existing as well as new directors, members of limited liability partnerships (LLPs) and general partners of limited partnerships will be required to verify their identity with Companies House.
  • New and existing persons with significant control (PSCs) will also need to verify their identity, with criminal sanctions for non-compliance.
  • Only individuals that have been verified will be able to present information on behalf of entities.
  • To perform all these verifications, the Government intends to develop a digital identity verification service that uses leading technology, making sure to address concerns around accessibility, usability, cost to business and data security. Companies House expect to start procuring some of the services and infrastructure needed for verification early in 2021.
  • The identity verification checks will not replace the existing anti-money laundering (AML) and customer due diligence (CDD) checks that regulated businesses are required to undertake.
  • The Government will work with regulated businesses and authorities to avoid any duplication in identity checks where adequate third-party identity checks have already been completed.

2. Financial statements

  • In line with international best practice, the Government will explore introducing full tagging standards for all businesses filing with Companies House, including looking at how information is filed, and how the register can best support small companies through this transition
  • To reduce abuses, a new limit will be imposed on the number of times a company can shorten its accounting reference period.
  • The Government will pursue making improvements to financial information available on the register. These improvements will be in line with the rest of the consultation’s focus on increasing the checking and validation of information.

3. Other matters

  • The Government will consult on ways to give Companies House powers to query and reject information submitted to it, including applications to use a company name.
  • To protect the personal information of directors, it will not be required for directors to supply their “occupation” to Companies House, and it will be possible to apply to remove the “day” element of directors’ date of birth, their signature and their residential address from public view.

Following the government’s response, Companies House have also stopped removing dissolved records from its Companies House Services (CHS) with immediate effect. They also announced that they will be putting additional dissolved records for all companies dissolved since 2010 back onto CHS from January 2021.

For weekly updates on international money-laundering, KYC and financial regulations, make sure to follow Know Your Customer on Twitter and LinkedIn.

Last updated on May 9th, 2023 at 09:33 pm

Claus Christensen

Claus Christensen is the CEO & Co-Founder of Know Your Customer. His vast array of previous experiences includes founding a technology company that develops email server infrastructure products for 60,000+ global customers and serving as VP Electronics at Thielert Aircraft Engines. A regular contributor to leading industry publications and a recognised expert in the anti-money laundering and financial regulation space, Claus is also the host of the RegTalks podcast and a senior lecturer of the Centre for Finance, Technology and Entrepreneurship (CFTE)’s RegTech Course.