Following our previous blog discussing Companies House reform proposals, Companies House have released more information, although have not confirmed how these will be implemented, or time frames.
In this blog, we are going to review the details that we do know about these changes, to keep you informed of these momentous changes.
Improving the quality of data on Companies House registers
Companies House currently has no powers to tackle incorrect or fraudulent information on their registers, unless someone submits a complaint to them about information contained on the register. Although the exact figure is unknown, according to an article by The Guardian, experts believe of the 4.9 million companies on the register (as of March 2022) as much as 20% of the data held could be false.
Under the Economic Crime and Corporate Transparency Act, new and enhanced powers are being provided to the registrar to help them meet new statutory objectives. Companies House list these objectives as:
- ensuring that anyone who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with).
- ensuring information contained in the register is accurate and that the register contains everything it ought to contain.
- ensuring that records kept by the registrar do not create a false or misleading impression to members of the public.
- preventing companies and others from carrying out unlawful activities or facilitating the carrying out by others of unlawful activities.
From March 2024, to help the registrar meet these objectives, Companies House are going to be given greater powers to challenge information that appears to be incorrect or inconsistent to help in their efforts to meet these objectives. Company names which may give false or misleading impressions to the public will also be scrutinised with stronger checks.
Any company that does not respond to Companies House’s requests for more information will be subject to serious consequences, including financial penalties and possible prosecution.
The implementation of this Act is going to introduce in one of the biggest changes to Companies House since its formation in 1844 – the introduction of an identity verification process for all company officers. It is hoped that the new identity process will deter those who set up companies for illegitimate purposes.
For new company registration applications, all directors, and people with significant control (PSCs) will need to complete the ID verification before the company will be incorporated. For any existing companies, the directors and PSC’s will have a specific transition period with Companies House to verify their identity. At the time of writing this blog, Companies House have not confirmed a timeframe for the verification to be completed.
Authorised agents, such as 1st Choice Incorporations, will also be required to verify the identity of company officers for any packages or services purchased through us. Once more information is provided to incorporation agents, we can provide an update on what this will entail.
Changes to accounts
Over the next 2 to 3 years, Companies House plans to transition towards software based accounts filing, eliminating the current system of web based and paper filings. With this, Companies House hope to modernise and digitise their filing routes. These changes will apply to both directors who file their own accounts, and companies using third party accountants to file their accounts.
Secondary legislation is going to set out changes to how micro-entity and small companies file their annual accounts. These companies will need to file their profit and loss accounts, and small companies that do not qualify as micro-entities will need to file a directors’ report. The option to file ‘abridged’ accounts is going to be removed. Companies House are intending for these changes to apply to all company structures, including LLPs who currently can only file paper copies. Once these changes are implemented, Companies House is expected to provide a list of available software.
Every 12 months, whether active or dormant, companies must file a Confirmation Statement, and changes to this process are going to be minimal. From March 2024, all new incorporations will need to provide an email address that is registered to their company. When existing companies file their next Confirmation Statement from March 2024 onwards, a registered email address will need to be added.
Companies will also be required to confirm on the Confirmation Statement that all future activities of the company will be lawful. Failure to confirm this will prevent the Confirmation Statement from being filed.
Changes to Companies House fees
A fee increase has been confirmed, however, Companies House have not yet announced how much the fees will change. The fee increase will help Companies House to recoup the cost of implementing the new legislation, as Companies House does not make a profit, and instead needs to adjust their fees on a cost-recovery basis to allow them to keep operating.
Protecting your information
One aim of The Economic Crime and Corporate Transparency Act is to introduce greater corporate transparency. However, Companies House acknowledge the need to protect personal information and aim to balance the need for transparency with the need to protect the privacy of individuals.
New measures to prevent abuse of personal information will be phased in once secondary legislation have been enacted by Parliament.
Suppression of information
Particular information displayed on historical documents will be able to be suppressed as part of these changes including:
- Business occupation
- Day of birth for documents registered before 10 October 2015, and;
- Residential addresses in most instances when shown elsewhere on the register
Protection of personal information
There is also going to be greater protection given to the personal information of people at risk of harm or violence, such as survivors of domestic abuse. Information that can be protected from being public include:
- Names (and previous names)
- Addresses where disclosure to the public puts residents at risk (such as a domestic abuse refuge)
In the most serious cases, all other details including service address and partial date of birth can be protected.
Changes to the registered office address
New rules relating to the registered office address of a company will be introduced in March, in which companies need to have what is deemed an appropriate address at all times. The registered office address should be one where:
- all documents sent should be able to come to the attention of any person acting on behalf of the company
- all documents sent to the listed address can be recorded by an acknowledgement of delivery.
This means that PO Boxes will not be appropriate for use as a registered office address. If an address is deemed inappropriate, Companies House will change it to their default address and the company must provide an alternative address with evidence of the right to use this address within 28 days, or risk Companies House striking off the company.
Whilst we are beginning to get a greater understanding of the changes being implemented by this Act, we are going to have to wait for more detailed information regarding certain changes.
When we hear another update regarding The Economic Crime and Corporate Transparency Act, we will be sure to update you with another blog post, as these changes will affect all aspects of company incorporation and operation.