Overview of Recent Changes to Companies House Laws
The Companies House reform plans have accelerated in recent months, with the government introducing legislation to strengthen regulations through its Economic Crime and Corporate Transparency Bill. The purpose of this initiative is to better protect companies from fraudulent activities by improving public record transparency. It’s increasingly important for business owners and accountants to pay attention as stricter compliance measures may be enforced with sanctions for non-adherence.
When will the Companies House reforms take effect?
There is currently no set date, but the government has expressed its intention to apply the new provisions as soon as possible. It is likely that rollout of these changes will occur gradually over a period of time, potentially months or even years.
Improving the quality of financial information at Companies House
Electronic filing
The overhaul of their filing rules will require companies to submit their accounts in digital format instead of paper. The new digital filings must be in the iXBRL format and contain comprehensive tagging information.
Small and micro company filing exemptions
Small and micro-entities will need to submit a profit and loss account upon filing their information. Small companies must provide a directors’ report as well, although micro-entities are exempt from this requirement due to its repeal in 2016 under FRS 105.
Eligibility statements
The reforms require companies declared as dormant to file eligibility statements in order to confirm their dormant status.
ID and implementing the ban on corporate directors
ID verification
ID verification will be imposed on new and existing directors, Persons with Significant Control (PSCs), members of LLPs, and general partners of limited partnerships. In order to be registered, these individuals must create a verified account through Companies House or via a third-party. Without this step completed correctly, the director and company will be held accountable for criminal conduct punishable by sanctions.
Corporate directors
The UK government has proposed reforms to the Companies House system that limit the appointment of corporate directors. To be eligible, companies must have at least one fully verified natural person on their register, and the appointment of a corporate director must satisfy two conditions:
- that all directors of the company seeking such appointment are themselves natural persons; and
- those natural person directors are, prior to the corporate director appointment, subject to appropriate ID processes.
Companies which fail to satisfy these conditions cannot be appointed as a corporate director. These rules will extend to all appointable entities, such as limited liability partnerships. Corporate directors will be restricted to only those entities that are registered in the UK.
Companies House powers
Overview
Companies House reforms are set to improve the accuracy and legitimacy of the data stored in their records. The registrar for Companies House will have increased authority to query and independently check submitted information, rather than needing to accept it at face value as was the previous practice.
Discretionary power to query and check information
The proposed reforms will expand Companies House querying and checking powers. These will include:
- the power to query, reject, or remove any new filings they deem to be suspicious or fraudulent;
- carry out additional checks such as ID verification and compliance of outstanding documents; and
- issuing sanctions on entities that do not comply with regulations.
All rejected documents will have a reason attached to them, giving companies the chance to provide additional information within 14 days.
Communication with other agencies
The reforms aim to improve data sharing between different public and regulatory bodies. The registrar will be given the power to share data and relevant information with certain public, regulatory and supervisory bodies in order to aid law enforcement, national security or help those bodies fulfill their obligations.
This will be the case where it:
- is required to allow the registrar to fulfil its statutory role and function;
- will assist other bodies in the prevention of crime or in the interests of national security; and
- will assist regulatory and supervisory bodies to fulfil their obligations and function.
Additionally, the discrepancies reporting requirements for Companies House will expand to include director information and registered office addresses. Furthermore, Companies House will be granted flexibility to extend provisions as necessary in the future.
If you would like to discuss these proposed changes and how they will impact your business, please get in touch with me, Stuart Hinds, or your usual Ecovis contact.
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This article was correct at the date of publication. It is intended as an aid and cannot be expected to replace specific professional advice and judgment. No liability for errors or omissions will be accepted. It is the responsibility of those using the information to ensure it complies with the law at the time of use and that it is used in line with relevant rules and regulations governing the subject matter in question.
