The Economic Crime and Corporate Transparency Bill is progressing its way through Parliament and is at the report stage in the House of Lords.   This Bill has been proposed to tackle money laundering in the UK, which is costing more than £100 billion each year.  There are major changes coming to Companies House in terms of the Bill, which will change Companies House role from a recipient of information to a more active gatekeeper in the fight against financial crime.

The changes will affect all UK registered companies, but time to prepare is short, with the Bill working its way through Parliament right now and looking set to quickly become law.   It is therefore imperative that all companies consider what actions they need to take now and in the future.   The various changes that will have an impact on Companies House are:

• Abolition of certain statutory registers, such as the register of directors
• Requirement to file more detailed shareholder information
• Restrictions on who can be a Director
• Abolition of abridged accounts for small companies
• Restrictions on company addresses and company names
• New powers of Companies House, allowing them to:
  • Cross-check and reject information filed by other public and private bodies
  • Impose civil penalties for failure to comply with Companies Act obligations
  • Require information to be filed digitally, including accounts
  • Restrict a company from shortening its accounting reference period
  • Reject or remove information if it appears suspicious, fraudulent or ‘impacts the integrity of the register’

This blog will cover the elements of verifying the identities and what information you should be considering at this time in preparation of the Bill becoming law.

Verification of directors and PSCs

A significant impact of the changes will be in relation to the obligation to verify the identities of directors and PSCs.

Individuals

For new proposed directors of a company, this means that individual's identities must be verified to Companies House before they can be appointed as a director (unless exempt).  If an individual's identity is not verified, Companies House will not register them as a director.  If an individual acts as a director while unverified, then the individual, the company and its officers will be committing an offence.

Corporate director

In the case of a UK corporate director, all of its individual directors must be verified. 

People with Significant Control (PSC)

In the case of PSCs, an individual should have their identity verified and where the PSC is a legal entity, one "relevant officer" of the legal entity should be verified. 

A relevant officer must be a natural person, i.e:

• a director of a company
• one of its members if an entity with its affairs managed by its members
• or an officer for all other organisations. This can also be a foreign legal entity or person.

The consequences when a PSC's identity is not verified is different from when a director is not verified in that Companies House will register them but an annotation will be shown on the register that they are unverified.  The PSC will then be required to respond to Companies House within certain time limits and if no verification is completed, an offence will be committed by the PSC and there may be civil penalties.

Verification of existing Directors and PSCs

It is expected that the verification of existing directors will be required in due course possibly giving a transitional period for directors giving them time to comply, i.e. prior to the next Confirmation Statement being lodged following the law coming into force. 

For existing PSCs the Secretary of State will specify a date after the new law is in force.

Processes to verify

There are two ways in which directors and PSCs can be verified and these are either:

• direct with Companies House who will provide this at no cost; or
• a verification statement delivered to Companies House made by an Authorised Corporate Service Provider (ACSP) (third party agents (i.e. Accountants, legal advisers, company formation and company secretarial agents registered with Companies House). 

Steps to take in preparation of changes 

All companies should now be putting steps in place in preparation of the new law coming into force by ensuring that all relevant parties are aware of the new rules for verification for directors and PSCs; and carrying out disqualification checks on proposed directors and PSCs as standard. It should be noted that whilst verification checks are completed online by Companies House, there will be other options for individuals with no identifying document or online access.

We will be publishing further blogs in due course in relation to further elements which have an impact on Companies House and companies in general as follows:-

• Abolition of certain statutory registers, such as the register of directors
• Requirement to file more detailed shareholder information
• Restrictions on who can be a Director
• Abolition of abridged accounts for small companies
• Restrictions on company addresses and company names
• New powers of Companies House, allowing them to:
  • Cross-check and reject information filed by other public and private bodies
  • Impose civil penalties for failure to comply with Companies Act obligations
  • Require information to be filed digitally, including accounts
  • Restrict a company from shortening its accounting reference period
  • Reject or remove information if it appears suspicious, fraudulent or impacts the integrity of the register

If you, or anyone in your organisation, requires advice or assistance, please contact our team.