white paper regarding the reform of Companies House has been published. Amongst the proposals are greater powers for Companies House in relation to ensuring the accuracy of information on the register, identity verification for directors and a ban on corporate directors.
This white paper follows the initial consultation in 2019 and further consultations that took place throughout 2020.
These reforms will see Companies House turn from a passive receiver of information to an active gatekeeper. Companies House will have a number of new powers:
- Power to query information
They will be able to query any fillings that may appear erroneous, out of the ordinary or potentially suspicious and would therefore impact the integrity of the register. They will be able to request further evidence or reject the submission.
- Remove information
They will have the power to remove any material from the register in quicker fashion and under broader scope than previously permitted.
- Digital filing
All information will need to be filed digitally and accounts will have to tagged in iXBRL.
All new and existing company directors, Persons of Significant Control and those filing information with Companies House will be subject to new identity verification requirements. Failure to verify identities will be a criminal offence and/or may incur a civil penalty. We note and welcome that original proposals that suggested that all shareholders would need to be verified has been removed.
These reforms also see the ban on corporate directors, originally introduced in the Small Business, Enterprise and Employment Act 2015, finally implemented. The only exception will be where all directors of the corporate director are themselves natural persons and prior to the appointment all directors had their identities verified.
Only UK registered corporate directors will be permitted. No overseas registered corporate directors will be allowed.
Whilst these updates to Companies House are welcomed as progress, albeit belated, the practical application of several of these proposals will be intriguing and we would welcome further guidance from Companies House how they intend to implement these powers. The acceptance of digital fillings for accounts is long overdue and we would encourage widening these services to allow all filings to be submitted electronically, including electronic payment methods for all filings.
A greater understanding of the process for challenging information, as well as the process for dispute resolution, should Companies House continue to query information will be of particular interest.
The new identity verification requirements appear to be a overcorrection from the erroneous removal of Director verification codes over a decade ago which resulted in the increase in fraudulent appointments and registrations. Whilst we welcome the attempts to combat such fraud, we are intrigued to see how this will work in practice, without becoming too onerous on directors. We do welcome the sensible removal of all shareholder verification. There are several questions which still to be addressed such as will all foreign photo ID be accepted and how long will companies have to provide this information for existing appointments and PSCs, to name but a few.
We would challenge the benefit of including traded companies within the requirement to provide a shareholder list, where a shareholder holds at least 5% of any class of the company shares. Listed companies on the London Stock Exchange are already required to disclose significant holdings above 3%, as and when notified to the Market, and it is unclear what benefit the provision of this information will provide. It may encourage more shareholders to hold via Nominee accounts.
It will be interesting to watch how this develops further and is one that Computershare will remain active in campaigning for the best interest of our clients.