Companies House and The Department for Business, Energy & Industrial Strategy (BEIS) have opened three consultations seeking to crack down on company fraud and improve corporate transparency.
Improving the quality and value of financial information on the UK companies register
This consultation, consisting of 29 questions, considers:
- How companies might be able to file accounts once only with government, instead of separately to Companies House, HMRC and other agencies.
- The filing options available to small companies with the aim of achieving a better balance between minimising burdens and ensuring the information provided is valuable.
- The proposal that all companies should file accounts digitally with Companies House.
- Additional checks Companies House could carry out on accounts filings.
- Consultation: Improving the quality and value of financial information on the UK companies register
Powers of the registrar
Respondents’ views on the powers of the Registrar are sought via 25 questions under three broad categories:
- Introducing a new power to query information.
- Reform of the Registrar’s existing powers.
- This includes a proposal for greater powers for the Registrar to administratively remove information from the register and to close current loopholes, such as the rectification of a registered office address.
- Rules governing company registers.
- Proposals include removing the requirement to keep a Register of Directors.
- Consultation: Powers of the registrar
Implementing the ban on corporate directors
- The consultation proposes that corporate directors will be prohibited unless their own boards comprise all natural persons and those natural persons have their identities verified. A 'Corporate director', in this instance, is a company or a Limited Liability Partnership (LLP) appointed as a director.
- Evidence suggests that the use of corporate directors can 'muddy the waters around ownership and provide a screen behind which to conduct illicit activity'. Opacity they create can weaken corporate governance by preventing individual accountability.
- At the same time, there are legitimate uses for corporate directors within corporate governance arrangements. A company may, for example, appoint a corporate director of a subsidiary in order to be able to have a number of individuals of varying professions represent that directorship in the boardroom, according to the agenda under discussion. Elsewhere they can be used as a means to facilitate joint ventures or to reduce administrative costs.
Directors: Consultation questions
The Principles
1. Q. In your view, will the proposed ‘principles’ based exception deliver a pragmatic balance between improving corporate transparency and providing companies adequate scope to realise the legitimate benefits of the use of corporate directors?
The Scope
2. Q. Bearing in mind the transparency objective, is the scope of the exception proportionate and reasonable?
3. Q. Assuming that ID verification will form a fundamental element of the corporate director regime, what do you see as the arguments for and against allowing LPs and LLPs be appointed as corporate directors? If they are to be allowed, how should the principle of natural person directors apply within these partnership models?
Compliance and Reporting
4. Q. Do these reporting requirements appear proportionate and reasonable?
Impacts
5. Q. Does the Impact Assessment provide a reasonable assessment of the costs and benefits of the prohibition and possible exceptions? In particular:
• Do you have any evidence as to why companies have reduced their use of corporate directors since the primary legislation was passed?
• Do you have any evidence on what might be the costs to companies from the proposed restrictions on corporate directors?
Potential for Extending Corporate Director Principles
6. Q. What are your views on applying the proposed Corporate Director principles more broadly to
a) LLPs, and
b) LPs, and how would you envisage ID verification operating in those contexts?
Consultation: Implementing the ban on corporate directors
All three consultations close on 3 February 2021.
Useful guides on this topic
How to start a company
A practical guide on how to form (incorporate) a private limited company and the points you need to consider.
Register of Persons with Significant Control
From 6 April 2016, all companies, Societates Europaeae (SEs) and Limited Liability Partnerships (LLPs) are required to keep a register of Persons with Significant Control (PSC).