Understanding the proposed changes to the UK's corporate transparency policy

In 2019, the UK's government consulted with individuals, companies, professional bodies, civil society organizations, and public sector agencies on a range of proposed corporate registry reforms.

The reforms aim to provide an updated regulatory framework for setting up and reporting company information, enhancing the role of Companies House – a body which has remained largely unchanged for over 150 years – and increase the transparency of companies and other legal entities operating in the country.

The reforms also hope to address growing instances of misuse of companies, concerns over the accuracy of the companies register, challenges safeguarding personal data, and enable Companies House to play a greater role working in partnership with other public agencies, and act as an enabler of business transactions and economic growth, while strengthening the UK’s ability to combat economic crime.

The government’s goal is to build a register with relevant and accurate information that supports the UK’s global reputation as a trusted and welcoming place to do business and a leading exponent of greater corporate transparency. 

Below is an overview of the proposed reforms being consulted:

Better identifying who is setting up, managing, and controlling corporate entities

• Introducing a mandatory identity verification for all directors and People with Significant Control (PSC) or ultimate beneficial owners of UK registered companies
• Introducing a mandatory identity verification for all individuals who file information on behalf of a company
• Continuing to allow company incorporations and filings to be made either directly at Companies House or via an agent for a period of time.
  • After this period:
    • Only properly supervised agents will be allowed to file this information.
    • Agents will be required to provide evidence of the verification they have obtained, thus helping to avoid duplicate identity checks.

Improving the accuracy and usability of data on the companies register

• Allowing the Registrar of Companies to query information that is submitted to Companies House
• Allowing the Registrar of Companies to remove information from the register under certain circumstances, to better ensure its accuracy
• Introducing a proposal to permit full iXBRL tagging for the submission of financial statements by companies to Companies House
• Tightening regulation on amendments to accounting reference periods and a revision of some broader aspects of accounts filings

Protecting personal information

• Removing restrictions to enable personal information to be removed from the register
• Introducing an obligation for entities that fall under the Anti-Money Laundering (AML) regulations to report discrepancies between the public register of companies and the information they hold on their customers
• Permitting cross-referencing of Companies House data against other data sets and records
• Improving the cooperation and data sharing between Companies House and UK law enforcement agencies, including filing accounts once only with government, instead of separately to Companies House, HMRC and other agencies
• Allowing limited partnerships to be “struck off” following a court order
• Allowing Companies House to query, and possibly reject, company names before they are registered
• Reforming how and under what circumstances Companies House issues certificates of good standing

Implementing the ban on corporate directors

• Provisions of the Small Business, Enterprise and Employment Act 2015 (which have not yet been enacted) will require all company directors to be natural persons and prohibit the appointment of corporate directors, subject to certain principles-based exceptions
• The proposed principles-based exceptions are envisaged being that a company can be appointed as a director if:
  • All of its directors are, in turn, natural persons; and
  • Those natural person directors are, prior to the corporate director appointment, subject to the Companies House identity verification process.
• Existing corporate directors will have a 12-month grace period

The UK’s government is continuing to consult on these and other aspects of register reform and are expected to announce their plans in 2021 before it goes up for legislative review. 

For more information on these changes and how they may affect your business in the UK, contact CT Corporation today.