Earlier last year, a consultation document was issued that proposed a ‘major upgrade’ to the responsibilities and powers of Companies House. If implemented, these proposed changes would be the biggest since the creation of the Register of Companies in 1844. The consultation ran from May to August 2019 and is now closed to further comment.
This is the first in a series of articles which will look at some of the changes proposed and the effect they may have on private limited companies.
Why is it Changing?
The Companies Act was developed to support transparency and ease of doing business. While the Government maintains that these two goals will remain the foundation of the services provided by Companies House, it acknowledges the growing demand for it to operate in a different way.
The 80-page consultation document issued by the Department for Business, Energy & Industrial Strategy proposes sweeping changes that would see Companies House move away from their traditional role in collecting and storing data into a more investigative role whereby data received will need to be assessed and verified.
While Companies House as it currently stands has controls that aim to maintain the integrity of the register, the limitations in terms of what it can and cannot do has often attracted criticism. As a result, the primary objective of the consultation document is to limit ‘the risk of fraud and misuse of information’. This will be done through giving Companies House new responsibilities in investigating and verifying the data it receives. It will also serve a vital role in assessing risks and sharing intelligence with other agencies such as HMRC and UK law enforcement bodies. The aim of the changes proposed is to ensure “robust enforcement action”.
What Does it Cover?
Over the Spring and Summer of 2019, views were requested on the four main areas covered by the consultation document:
- Checking the identity of who’s setting up, managing and controlling companies;
- Improving the accuracy and usability of data on the register;
- Protecting personal information held on the register; and
- Improving the detection of possible criminal behaviour.
Who is Affected?
The Government intends the reforms to apply to all corporate bodies that are subject to the disclosure requirements of the Companies Act 2006, where relevant. This will include:
- Private and Public Limited Companies;
- Unlimited Companies;
- Unregistered Companies;
- Overseas Companies;
- Limited Liability Partnerships; and
- Limited Partnerships.
Some of the changes will also apply to beneficial owners of overseas entities that own UK property i.e. entities that fall under the provision of the draft Registration of Overseas Entities Bill.
As a result, the consultation document requested the views of the following people and organisations:
- Directors of Companies (and Officers of other Corporate Entities; see note above);
- Company Shareholders and the Investor Community;
- Business Representative Bodies;
- Trust and Company Service Providers and other professional bodies;
- wider Civil Society groups;
- Academics and Think Tanks; and
- members of the public.
What Will This Mean for Me?
The proposals will not have a significant impact on the day-to-day lives of business. They will however necessitate amendments to the level of detail of data that is submitted to Companies House and the powers of Companies House in the usage of that data. As a result, Companies House will go through a major transformation in the next few years, which will affect every aspect of the work they do.
The transformation will cover all digital services: both customer-facing and internal. Digital systems used by Companies House will be entirely redesigned and will be intricately connected to HMRC’s Connect computer system and other government systems. The aim of this is to ‘improve the exchange of intelligence between Companies House, HMRC and UK law enforcement bodies’.
The consultation points out that the reforms in terms of systems and staffing at Companies House will require primary legislation to enact and take years to deliver. There will also be an impact on the fees charged by Companies House. While these seem likely to increase, the government has given assurance that it fully expects them to remain very low compared to international standards.
We will look at the changes proposed in greater detail over the next four articles. These will cover the four main areas which the consultation document attempts to reform. Our next article will focus on the changes proposed to the responsibilities of Companies House in checking the identity of who’s setting up, managing and controlling companies.
If you have any queries about how the proposed changes to Companies House will affect your business, please contact Andrew Meredith on 01689 877081.
Baxter & Co are registered as Auditors in the United Kingdom by the Association of Chartered Certified Accountants.