BEIS is proposing wide-ranging reforms to Companies House which will have a potentially significant impact in tackling fraud and dubious schemes. The consultation looks at implementing a ban on corporate directors which are often used in complex business structures designed to hide the identity of the individuals that own or run a company. NB corporate directors can also be found in perfectly legitimate businesses, in isolation such a structure is not necessarily an indication of anything being amiss.
Currently the law only requires that one company director be a “natural” person, and any number of corporate directors which are either companies or legal entities. The proposal will prohibit corporate directors unless their own boards comprise all natural persons, who in turn have had their identities verified by Companies House. Any company appointing a corporate director will be expected to take reasonable steps to check that the corporate director itself does not have any corporate directors, and will be required confirm the same in their Annual Confirmation Statement.
This change will increase transparency in corporate structures, making it much easier to identity the people that own and control businesses. This in turn may result in fewer disguised remuneration schemes which often use complex corporate structures to minimise the identity of the individuals behind them.
Two other consultations have also been issued aimed at reforming Companies House, one of which will give the Registrar new powers to query and check information before it is placed on the Companies House register. The other consultation looks at digital filing of company accounts just once – rather than separately at both Companies House and HMRC. This will close loopholes in filing requirements and will improve the quality and accuracy of information held on the register.
Cumulatively, these changes signify a desire to enhance Companies House powers, and in turn clamp down on fraud and money laundering. The consultations close in February, and we hope that quick action will be taken so that some of the tactics used by disguised remuneration scheme promoters can be prohibited.