Insight 13 October 2020

Corporate Transparency and Register Reform

UK Corporate Entities - UK Government publishes Corporate Transparency and Register Reform

Companies House will drive reforms which will increase corporate transparency and assist in combating fraud and money laundering.

The reforms implement options subsequent to Government consultation. The key areas are:

  • Knowing who is setting up, managing and controlling corporate entities
  • Improving the accuracy and usability of data on the companies register
  • Protecting personal information
  • Ensuring compliance, sharing intelligence, other measures to deter abuse of corporate entities

New measures will include compulsory verification of key controllers of UK companies, namely the directors, Persons of Significant Control (PSCs), designated members of LLPs and General Partners of LPs, along with those parties who file on behalf of a company. Directors will no longer be appointed until verification of their identity is complete.

The Government accepted consultation feedback regarding verifying shareholder identity, and as such this will not fall within the current scope.

The Government proposed several changes, intending to make the UK a more attractive place to establish and grow businesses whilst keeping the ease of reporting as streamlined as possible. The proposed reform is structured around three key areas:

  1. Maintaining reliable information via the details on the registry. This increases transparency for all parties using the registry, especially those seeking credit information or financing, with the aim to enable quick and informed decisions.
  2. Fully digitising the processes and enhancing the user experience on the registry whilst keeping the personal data of those individuals protected.
  3. Combating financial crime by being able to trace the misuse of corporate entities and tackling weaknesses in the current system.

Lord Callanan, from the Minister for Climate Change and Corporate Responsibility, stated:

The reforms will support my ambition of making the UK the best place in the world to start and grow a business. The reforms will bring many benefits to businesses through streamlined and digitised processes and an improved user experience, reflecting the needs of business in the 21st century economy. The impact on overall speed of incorporation and other filings will be negligible: we still expect most companies to be able to incorporate easily within 24 hours.”

Lord Callanan Minister for Climate Change and Corporate Responsibility

A fundamental change in the reform relates to the introduction of a compulsory identity verification scheme.

The design of the scheme is to increase the reliability of data shown at Companies House. The considerations around exactly what this regime will entail, are ongoing. Still it is likely that authorised parties, such as professional service providers, will be able to undertake filings on behalf of their clients and, as part of this process, provide evidence that they have verified the necessary identities to the registry.

Companies House does not intend to duplicate anti-money laundering checks undertaken by agents where these checks are part of the customer due-diligence processes. Agents will be able to operate via a single account as an agent or ‘presenter’ of the information. Agents can then provide the relevant evidence of identity checks directly to Companies House for each director or PSC for their account creation, thereby streamlining the appointment processes.

Companies House continues to work closely with the Information Commissioner’s Office and other interested stakeholders to develop the most appropriate policies and procedures for processing, storing and sharing personal information. This data will be obtained as part of the requirement to provide evidence of identity checks within the new proposed digitised process. Furthermore, the information to be filed in respect of directors’ appointments is set to change. The need to disclose occupation will be removed and the plans intend to strengthen measures to protect personal information such as the date of birth, residential address and signature of those directors.

Companies House is currently engaging with the market to develop a 24/7 digital identity verification process. Under these plans a director would not be able to be appointed until their identity has been verified by Companies House. It is expected that Companies house will start procuring some of the services and infrastructure needed for this verification in early 2021.

Companies House will apply the new identity verification requirements to all live registered companies and their agents. There are currently approximately 10 million existing directors and PSCs on the register that will need to be verified. There will be a transitional period operating retrospectively, where current PSCs and directors will be allowed to continue their current roles. Once this period has expired, unverified individuals will face compliance action and possible prosecution.

Further proposals noted in the reform include granting Companies House greater power and scope with the ability to make enquires, conduct investigations and remove false information from the register. The second consultation will be looking towards a reform of company accounts and some suggestions so far cover:

  • Reviewing minimum digital tagging standards in accounts (such as iXBRL tagging in line with international standards);
  • Revisiting the financial information currently presented (such as limiting the number of times it is possible to shorten the amounting reference dates)
  • Improvements around the usefulness of accounts, such as turnover and ensuring any additional data being requested is designed to improve transparency, accuracy and integrity of accounts filings; and
  • Reviewing the exemptions that allow companies to submit micro or dormant accounts.

The Government stated that it would bring forward legislation to enact the reforms to the register “when Parliamentary time allows”.

The Sanne Corporate and Fund Services team based in the UK regularly supports a large variety of businesses with company incorporations and ongoing filing obligations at Companies House. We have over 130 people based in our City office, providing corporate secretarial services to a range of clients in the alternative asset space, and are well equipped with the expertise to guide you through this process.

The new changes accompanying the introduction of a compulsory identity verification scheme is another area where Sanne is well placed to support our clients by acting as an authorised agent and facilitating a smooth process with you regarding the new identity and verification checks. We can also provide support around the AML documentation.

Let’s talk…

For additional information, or to discuss any of the topics highlighted above, please do get in touch with Coral Bidel.

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