NEWS EXTRA
COMPANIES HOUSE : THE CASE FOR REFORM
The work and practices of Companies House, the repository for all information on the majority of the UK’s companies and similar registered entities, is under review. Adam Bernstein reports.
A BUSINESS IS started in the UK every 75 seconds and we are home to five of the top 10 fastest- growing businesses in Europe. Technological developments and increased reliance on information for credit and referencing purposes mean that what we access from Companies House is becoming ever more critical. In May 2019 the Department for Business Energy and Industrial Strategy ran a consultation about options to enhance the role of Companies House and increase the transparency of UK corporate entities.
Given a span of 80 pages much is covered, and the view is clearly that much work needs to be done to help keep the UK in the leading pack of countries in which it is desirable to start and grow a business.
In recent years concerns have grown that the UK’s framework is open to misuse. Concerns arise mainly from four interrelated issues:
Misuse of UK companies by criminals
Most UK companies are legitimate. However, some are being misused for money laundering. UK companies and partnerships have been linked to the Russian and Azerbaijan laundromat scandals. There have also been cases of company names being registered which wrongfully suggest a connection to existing high profile
companies: these are misleading and potentially harmful to the public. Such cases, though rare,
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raise questions about whether enough is known about who is really behind all corporate entities registered in the UK.
Accuracy of information
The accuracy of information held at Companies House is another concern.
Since 2015, almost all information at Companies House has been accessible online, free and without delay. It was accessed over 6.5 billion times last year. However, there are cases of false information being filed, whether by accident or deliberately. These include fraudulent audit reports, where companies falsely claimed that their annual accounts had been audited by well-known audit firms. They also include individuals being fraudulently appointed, or companies providing false addresses.
Abuse of personal information
Since the 2015 move online, information on some 6.7 million company directorships has been easier to access. Not all personal information is made publicly available and the government has taken action to protect directors’ information. Nonetheless, company directors are a target for, amongst other things, identity theft.
Nature of cross checks The limited nature of cross checks between Companies House and other public and private sector bodiescan be abused
by persons who report one set of information to Companies House and different information to other agencies and private sector bodies. The left hand not knowing what the right hand is doing in what should, in the future, be a better connected and integrated world.
Knowing who is setting up and controlling corportae entities.
The government is proposing that individuals who have a key role in companies should have their identity verified. This would apply to company officers (directors), People with Significant Control (PSCs), and those filing information.
It should be possible to introduce such identity checks simply but there are also important data protection issues. The consultation sets out why greater certainty over the identity of those shown as owning, running or controlling companies is needed, it shows how new technology offers the opportunity to obtain greater assurance over identities, and sets out far-reaching proposals to introduce identity checks for those who file information on the register, directors, PSCs and, on a voluntary basis, shareholders. The government accepts and advances the case for introducing identity checks and believes that Companies House should have responsibility for them. Improving the accuracy and usability of data on the companies register
The consultation sets out a series of proposed reforms that would deliver better quality information on the register - including extending the powers of Companies House to query and seek corroboration on information before it is entered on the register and making it easier to remove inaccurate information. In addition, the government is proposing improvements to the process and delivery of annual accounts to Companies House. Government intends to maintain the current approach to retaining records of dissolved companies on the register for 20 years from dissolution.
There are two themes that run through the consultation: reforms that would allow Companies House more discretion to question the information submitted to it and amend or remove information after it has been registered; and reforms to the information disclosed that will improve the utility of the information for those accessing company records.
Protecting personal information
The government has outlined how Companies House will store and control access to information if its proposals are adopted and outlines how personal information will be stored and accessed, the circumstances under which it may be disclosed and to whom. Under identity verification proposals, access to the register will be carefully managed, allowing only identified
www.buildersmerchantsjournal.net September 2020
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