Corporate transparency and register reform: additional consultations

On 09 December 2020, the Government published 3 new consultations in support of its reforms to clamp down on fraud and give businesses greater confidence in transactions. The new consultations follow on from the publication, in September 2020, of the Government's wider plan to reform the Companies House register.  (See Corporate transparency and register reform: Government response.)

The consultations seek comments on the following areas:

• Implementing the ban on corporate directors;

• Improving the quality and value of financial information on the UK companies register; and

• Powers of the registrar.

The consultations close on 3 February 2021. Proposals will require primary legislation to implement, as well as being dependent on funding for the associated operational changes at Companies House.

Ban on corporate directors

The current law only requires that one director on a company's board be a real or "natural" person, whilst any number may be "corporate directors" -- i.e. other companies or legal entities.  

Provisions to prohibit the use of corporate directors were included in the Small Business, Enterprise and Employment Act 2015, but these provisions have yet to be commenced.  The Government believes that now is the time to bring these provisions into force, in the context of its wide-ranging package of measures aimed at improving corporate transparency and reforming the companies register.

In this consultation, the Government is seeking views on a "principles" based exception to the general prohibition on corporate directors.  Under this exception, a company (including an overseas corporate entity) will be allowed to be appointed as a director provided that:

• all of its own directors are, in turn, natural persons and

• those natural person directors are, prior to the corporate director appointment, subject to the proposed Companies House identity verification process.

The consultation also seeks views on extending the corporate director principles more broadly to limited liability partnerships and limited partnerships.  

Improving the quality and value of financial information on the UK companies register

This consultation contains proposals to improve the way financial information is filed with, and published by, Companies House. The consultation is split into three parts and includes the following proposals:

How information is submitted to Companies House

• filing financial information once (using a centralised accounts submission standard) rather than separate filings to HMRC, Companies House and other relevant agencies;

• requiring all financial information to be delivered in a digital format at Companies House and introducing a minimum iXBRL tagging standard (currently about 15% of companies are still filing paper accounts); and

• reducing the timescales for delivering financial information -- 3 months from the financial year end for public companies and 6 months for private companies.

What information should be filed at Companies House

• requiring directors to sign a declaration of eligibility confirming that their company meets certain threshold conditions, in order to file under the relevant regime (eg small or medium sized company);

• the introduction of validation checks by Companies House to ensure the threshold conditions match the requirements for the filing regime being used; and

• reviewing the filing options for "small" companies to reduce the number of available options and to make the filing process easier, whilst also increasing the value of the register.

What Companies House does with this information

• amending the Companies Act 2006 to specify that the accounts filed with the registrar must be the most detailed accounts that have been prepared for the company's members;

• requiring Companies House to perform additional, but limited, checks on accounts; and

• improving how financial information is displayed on the register.

Reform of the registrar's existing powers

This consultation seeks views on new powers for Companies House to query, remove and amend information on the public register. Proposals include the following:

• a new power for the registrar to query information pre and post- registration where an identified error, inaccuracy or anomaly appears fraudulent, suspicious or might impact on the integrity of the register and the UK's business environment. The new power will mean that the registrar is no longer obliged to accept documents for registration where there is a reason to query the information provided. Views are also being sought on the use of any new querying power in connection with the registration of company names;

• greater powers for the registrar to administratively remove information from the register and to close current loopholes (eg potential abuses of the change of registered office regime);

• conferring the power from the Secretary of State to the registrar, to require documents to be delivered by electronic means only; and

• changing the rules governing the registers that companies must keep themselves, including the removal of the requirement to keep a register of directors. The public register would then become the single, verified source of information with respect to directors. Views are also being sought on the requirements to keep other statutory registers and also on the elective regime that allows private limited companies to hold information on the public register rather than in their own statutory registers.