Companies House Reform on the Horizon

In September 2020 we wrote about the government's announcement that the UK's register of company information would be reformed (something widely recognised as being long overdue) - Companies House Reform Urgently Required.

Yesterday the Queen's speech included the welcomed announcement that there will be a further Economic Crime and Corporate Transparency Bill. The purpose of the Bill is described as being to crack down on criminals abusing our open economy, ensuring that we drive out dirty money from the UK and strengthening the UK's reputation as a place where legitimate businesses can grow and create jobs.

Main elements of the Bill are said to include:

• Broadening the Registrar of Companies’ powers so that they become a more active gatekeeper over company creation and custodian of more reliable data, including new powers to check, remove or decline information submitted to, or already on, the Company Register.
• Introducing identity verification for people who manage, own and control companies and other UK registered entities. This will improve the accuracy of Companies House data, to support business decisions and law enforcement investigations.
• Providing Companies House with more effective investigation and enforcement powers and introducing better cross-checking of data with other public and private sector bodies.

If these aspects of the Bill are dealt with adequately this could indeed mark significant progress in the battle to rid the UK of "dirty money". However, as ever, the devil will be in the detail and (more crucially) the funding afforded to Companies House. It is unclear at this stage on what basis information might be removed or declined and how thorough "checks" are likely to be. Will Companies House, for example, be asking probing questions regarding complex ownership structures sitting behind corporate shareholders? This remains to be seen. Verification of the identity of people who "manage, own and control companies" should of course be welcomed, but this will only be effective if sufficient care is taken to establish who really does "manage, own and control" the company in question. That is often far from obvious.  

The Government states that Companies House already supports law enforcement with about 750 investigations every month, up from fewer than ten a month six years ago. In comparison with the staggeringly woeful picture six years ago this is indeed progress. However, as we indicated previously, is there a proposal for checking the circa 10 million directors / PSCs already registered? The Government also reports that "Companies House plays a key role in the UK’s strong, transparent and attractive business environment and incorporation is among the fastest and cheapest in the world, with 99 per cent of applications processed within 24 hours." Is this really an accolade to be proud of? Given the complex structures used by criminals to funnel their funds to the UK, surely this simply highlights the inadequate powers currently vested in Companies House?

We await with interest sight of the proposed Bill. However, if the aim is a 24 hour turn around for an application for a new company on the register then we are yet to be convinced that the Government's reforms will tackle the severity of the problem currently faced by the UK economy.