UK government proposes reforms to enhance corporate transparency
East of England lawyers Ellisons Solicitors details the proposed reforms put forward in a recent UK government consultation on corporate transparency.
The UK’s corporate standards are highly regarded worldwide, a sentiment reflected by the fact that a new business is established in the UK approximately every 75 seconds. The government is committed to retaining this high standard and earlier this month released a government consultation to this effect, entitled ‘Corporate Transparency and Register Reform’.
The consultation acknowledges that the current Companies House system for retaining company information has a number of positive aspects, including the fact that it is a register which is freely accessible to the public and therefore enables society at large to police corporate activity and monitor company transparency.
However, a number of concerns have also been identified and some of the main arguments for reform are as follows:
- The abuse of the current system by international criminals and corrupt elites e.g. for money laundering purposes;
- The inaccurate information held on Companies House e.g. fraudulent audit reports and false addresses; and
- The abuse of personal information held on the register e.g. directors being the target of identity theft.
The proposed reforms
The proposed reforms, which aim to combat the above issues, include:
- Identity verification of directors and persons with significant control;
- Updating shareholder information on Companies House within 14 days of a change, rather than in the annual confirmation statement;
- Greater protection of personal data, especially in relation to directors;
- Improved investigation and enforcement relating to non-disclosure and false-filing offences;
- Enhanced cross-checks on corporate data between public and private bodies; and
- Investment in technology and the skills of Companies House staff to make the register more effective and resilient.
Conclusions & next steps
These reforms suggest a positive step towards improving the accuracy of the information held at Companies House and combating economic crime, which in turn will help to improve business efficiency. It does, however, remain to be seen if the more stringent requirements relating to identity verification and filing could cost businesses more time and money.
Should the government choose to implement these reforms, it is likely to take some years before they are enacted as they are the most significant reforms to the company registration framework since 1844. The passing of primary legislation will be necessary, as well as introducing sanctions for those circumventing the new procedures.
Read the full consultation
Click here for more information on the proposed reforms.