On 18 September 2020, the Department for Business, Energy and Industrial Strategy (‘BEIS’) announced that the UK’s register of company information (‘Companies House’) will be reformed to clamp down on fraud and money laundering. This follows the consultation on the options to enhance the role of Companies House and increase the transparency of UK corporate entities published in May 2019.
THE PROPOSED CHANGES
The changes include compulsory identity verification to be introduced to help trace people who are committing fraud or money laundering and to give Companies House greater powers to query, investigate and remove false information.
Under the plans, identity varication would apply to directors, People with Significant Control (‘PSCs’) and the persons that file information at Companies House such as a 3rd party acting as an agent. Identity checks would be run not only on incorporation of a company but also throughout its lifetime.
The case for reform was built on:
- Misuse of UK registered entities by international criminals and corrupt elites.
- Concerns about the accuracy of information held at Companies House.
- The abuse of personal information on the register.
- The limited nature of cross checks between Companies House and other public and private sector bodies.
The changes aim to increase the reliability of the data showing who is behind each company so that businesses have greater assurance when they are entering transactions with other companies.
It will also improve the ability of law enforcement agencies, such as the National Crime Agency, to trace their activity for suspected fraud or money laundering.
THE POTENTIAL IMPACT
Under current processes, incorporating a company can be a quick procedure. The introduction of identity verification checks for prospective directors and granting powers to Companies House to query and request evidence before an entry is place on the register could cause delays.
Companies House has stated that identity verification will take place through a fast, efficient, digital process and is expected to take a matter of minutes via the introduction of a new Companies House identity and access management system. Therefore, it is expected that these reforms will not impact on the speed at which a company is formed, and other filings are completed. Most companies will be able to be incorporated easily within 24 hours as is the case now.
Given that BEIS is proceeding with developing a digital verification service using leading technology but still provide alternative, non-digital methods for those unable to prove their identity electronically, the consultation has raised data security concerns. The BEIS response has been to work closely with the Information Commissioner’s Office and other data security experts to ensure any processing, storage and sharing of identity data is proportionate and fully compliant with UK data protection legislation. It is expected that Companies House will in due course fully address concerns around accessibility, usability, cost to business and data security.
While Companies House state that the new processes will not affect incorporation timescales, we await with interest more detail on the proposals, which could affect the incorporation of local authority-owned companies more than others due to the additional requirements of Companies House when incorporating such companies.
This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any of the issues raised in this article, please contact us today by telephone or email email@example.com.