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Corporate Transparency and Register Reform

Details of the proposals and ICAEW’s involvement.

Background and summary of the proposals

Background

In September 2020 Government published the response to its 2019 consultation on reform of company law, saying it intends to proceed with the main elements of the proposals.

The proposals are intended to reduce use of UK companies for criminal purposes and increase the amount (and quality) of information disclosed about UK companies.

It will result in extensive changes to the UK’s company law framework and the role of Companies House. The changes to the register are said to be the most significant in 150 years and will require Companies House to verify the identity of directors and other individuals who file information with it for the first time. Many of the changes will apply also to LLPs and certain other bodies.

The proposals do not take forward all the potential reforms (or alternatives) considered in the 2019 consultation. Some proposals (eg on reform of company accounts) are to be subject to additional consultation procedures and are not covered in detail here.

Summary of the proposals

Readers should refer to the published response for an outline of the detailed proposals.

The following is intended only to identify the main topics for ease of reference. The headings follow the order in the executive summary of the response and the numbering refers to paragraph numbers in the response.

It is expected that there will be transitional arrangements for existing companies. [44-46] and that third-party providers will be involved on identity and access management systems [47].

Knowing who is setting up, managing and controlling corporate entities

  • Single user account for individuals across all filings (eg a director uses the same account for all companies of which he/she is a director) [14, 15, 126-129, 157160]
  • Mandatory verification of directors [111-114]
  • PScs to verify themselves and the register to say whether or not verification has been done [119-122]
  • Electronic verification of ID normally, but with ability for other methods (eg post) for purposes [16, 80-85]
  • Ability of AML regulated third-party agents to do verification required to make filings for their customers (ie so directors/PSC’s do not need also to be verified by CH) [17, 19, 91-96]
  • Information on third party agents to be kept to minimum on public register [103-105]
  • Director appointments (and removals) are not to have legal effect until recorded on the register [17, 18, 111-114]
  • Transitional period for verification in relation to companies operating when the new rules are implemented [20]
  • Enforcement [20]
  • Does not cover shareholders [21]
  • Disclosure of residential address (with law enforcement agencies only?) [164-168].

Improving the Accuracy and Usability of Data on the Companies Register

  • Increased powers for Companies House to scrutinise and reject filings [22,23,174-177, 181]
  • Checks to be based on risk assessments, including informed by ‘civil society’ [24]
  • Administrative procedures to be changed to make it easier to remove/amend inaccurate information on the register [25]
  • Reform of company accounts, including use of iXBRL – to be subject to further consultation and outside the scope of this briefing paper) [26-28, 188, 202-203]
  • Reform of rules on shortening accounting reference periods to once only in five years. [29, 190-194]
  • Requiring disclosure of the regulated market etc from companies relying on exemption from PSC register. [30,31, 208, 209]
  • Increased public access to records of dissolved companies (broadly, from 6 to 20 years) [32,33, 213-220] 

Protecting Personal Information

  • Remove requirement for directors to list occupation [34, 239-241]
  • Process to be introduced to remove certain historic information (eg signatures) not currently required in certain cases [35, 241-244, 255-257]
  • Hiding of previous name for gender change to be considered further [36, 248, 249]
  • Information removed above, to continue to be available to law enforcement [37]
  • Collection of further data and access to information under consideration [224-225]

Ensuring Compliance, Sharing Intelligence, Other Measures to Deter Abuse of Corporate Entities

  • Legislative gateways to enable Companies House to share data with other ‘data sets’ [38, 269]
  • Extending obligation on [AML] obliged entities to report anomalies from PSC information to broader information on the register [39, 269-272]
  • Ability for limited partnerships to be struck off following court order [40, 41, 284, 285]
  • Ability for Companies House to reject company names before (or after) registered, subject to further consultation [42, 305-310]
  • Certificates issued by Companies House (eg certificates of ‘good standing’) – to be reviewed, not requiring legislative change [43, 316-318]

ICAEW’s involvement and initial views

Our responses to related consultations

The proposed reforms are part of Government’s efforts to improve trust in UK companies and increase disclosure requirements. Earlier reforms included the introduction of the register of persons with significant control in 2015 and ICAEW responded to the various consultations on those reforms. We also participated in a working group to help government develop its guidance on the register.

We responded to the 2019 consultation on the current proposals in Rep 78/19 and have been participating in the BEIS Working Group meetings since November 2020.

Main areas of interest and potential concerns

In line with our earlier responses, we broadly welcome many of the proposed reforms. In particular, the requirement for Companies House to perform verification checks will help to fill what is currently a significant gap in the UK’s AML regime and, on balance, we support the proposal to allow verification checks to be done by third party agents.

These proposals have yet to be fully developed and many detailed questions arise, the answer to which will determine whether the reforms are likely to succeed. In particular, a balance will need to be struck so that the new framework both deters abuse of UK companies and is cost effective, fast and flexible enough to accommodate innovative and fast-moving business on which the future prosperity of the UK depends. This is one area where we believe that ICAEW can contribute useful insights (see “ICAEW as a stakeholder” below).

The concerns raised in our response to the consultation continue to apply in relation to some of the proposals, most notably the proposal that appointments and resignations of directors will not be effective until shown on the Companies House register. We continue to think that this risk disproportionate adverse consequences.

BEIS working group and next steps

ICAEW membership of BEIS Working Group

Government recognises the importance of the proposed reforms and has committed to consult further before introducing the legislation that will ultimately be required to implement most of the proposals.

The Department for Business, Enterprise & Industrial Strategy has convened a Working Group to support it (and Companies House) in the development of detailed policy proposals. The Group includes individuals from ICAEW and other industry and professional bodies and it is expected to test and provide constructive challenge to proposed policies from the perspective of the stakeholders represented.

Next Steps

Following further consultations referred to above, BEIS is expected to issue a more comprehensive set of proposals for consultation before legislation is proposed.

ICAEW as stakeholder in the company law reforms

The proposed reforms are important for ICAEW and its members, and ICAEW is well placed to provide valuable insights to Government on the subject.

ICAEW is the largest accountancy professional body supervisor in the UK, supervising around 11,000 firms in respect of anti-money laundering. We support Government’s determination to combat money laundering and proportionate company law reform to do so.

Many of our member firms are structured as LLPs or companies and they will be directly impacted by increased verification requirements and related changes.

The services provided by many of our members include establishing companies for their clients or providing company secretarial services and these will be directly, and potentially severely, impacted by the proposals.

Our members are investors in, or directors of UK, companies of all sizes throughout the UK. The majority of FTSE 100 companies have an ICAEW member on the board. They reasonably expect the UK to have a company law regime that is both trusted and efficient (in terms of cost and meeting needs of business in a competitive world).

Our members advise over 3 million businesses on their affairs, including on various company law requirements. They look to Government to ensure that the law is clear and consistent and are conscious of the inefficiencies that arise where it is not.

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