In recent years, the landscape of corporate governance in the UK has evolved significantly, particularly in the wake of growing concerns about transparency, accountability, and the integrity of financial reporting. As part of a broader effort to strengthen the UK’s corporate framework, the government has legislated for certain changes to the filing requirements at Companies House and the powers of the registrar. The stated aims of the changes are to enhance transparency, reduce fraud, and ensure that publicly available information is accurate and up-to-date.
This article explores the key changes and their potential implications for businesses and stakeholders.
Background
Companies House serves as the official registrar of companies in the UK, where incorporated entities must file various documents, including annual accounts, confirmation statements, and details of directors. Concerns have arisen in recent years over the accuracy and reliability of the data submitted. Companies House has previously viewed itself as a passive “receiver” of data, rather than an active regulator with responsibility for reviewing information published.
Instances of fraudulent filings, the misuse of shell companies, and the ease with which individuals can establish companies without any checks have highlighted the need for reform.
Key Proposed Changes
- Enhanced Verification of Identification and Information
As noted in our earlier article in February 2024 (https://ryecroftglenton.com/2024/02/21/changes-afoot-at-companies-house/ ) some elements of the Economic Crime and Corporate Transparency Act (“ECCTA”) came into force on 4 March 2024. A Registered Office must now be capable of acknowledging a delivery, and be a place where documents can be expected to come to the attention of a person acting on behalf of the company. This means PO Boxes can no longer be used as a registered office. Eventually, Directors and Persons with Significant Control (PSCs) will need to verify their identities, but the timeline for implementing this is still under discussion.
- Changes to confirmation statements
When filing a confirmation statement, the directors (or members, if an LLP), must now confirm the company’s activities are intended to be legal. This may seem an unusual requirement, but it is related to new offences created under the Act. A company must also now supply a registered email address.
- Increased powers to query information
The ECCTA includes new powers for Companies House to request supporting information from companies on documents which have been filed, initiating investigations into suspicious filings and where discrepancies or concerns are identified, Companies House could challenge or reject filings until satisfactory explanations or documentation are provided. These new powers came into force on 30 September 2024, along with some others meaning companies can now apply to remove documents (in certain circumstances) directly with Companies House rather than obtaining a court order.
- Increased Penalties for Non-Compliance
To encourage compliance with filing requirements, the government is proposing increased penalties for companies that fail to meet their obligations. The first step in this process, is the publication of a new enforcement policy by Companies House, which took place on 27th September 2024. Companies House now stratifies its “customers” into five levels within their compliance framework, allowing them to prioritise targeting those entities and individuals who are seriously or serially non-compliant with their most stringent powers, being prosecution and potential disqualification as a director and striking the company or other entity off the register. Companies House now has the ability to levy financial penalties on companies or individuals for non-compliance, in addition to late filing penalties applicable to certain documents.
- Greater Access to Accounts information
The proposed changes include plans to make more information publicly accessible. This would involve all companies being required to publish their P&L account, and also directors’ reports and audit reports being included with small company filings (but not micro-entities). These proposals need to be debated and finalised by parliament, and current indications are some sort of compromise perhaps akin to the old-style medium company “abbreviated” accounts which were possible under the Companies Act 1985, for those old enough to remember them.
Enhanced access to information will allow stakeholders, including investors, creditors, and the public, to conduct thorough due diligence on companies. This need is to be balanced by the desire of small business owners for privacy and avoiding disclosing sensitive commercial information to the general public.
Conclusion
The proposed changes to Companies House filing requirements are likely to have significant implications for businesses across the UK:
Jon Routledge
Director
- Increased Administrative Burden: Companies may face additional administrative tasks related to the verification of information and compliance with new filing deadlines. Smaller businesses, in particular, may find this challenging without adequate resources. Added to this is the threat of a new penalty regime.
- Enhanced Trust and Credibility: On the positive side, the reforms are expected to enhance the credibility of UK businesses. Improved transparency can foster trust among investors and customers, potentially leading to increased investment and business opportunities.
Should you have any queries on the above, please do not hesitate to contact us.
Photo courtesy of Vojtech Okenka, Pexels