Showing its commitment to enhancing national security, fighting corruption and illegal money circulation, and spurring enterprise, the UK authorities have issued the White Paper which stipulates the authority’s final position on proposed company law reforms. These encompass a plethora of obligations on corporate executives and a reviewed role for Companies House (further mentioned as CH). These amendments will be entered into force via a bill to be introduced into Parliament and accepted by amendments at CH.
Board of directors
In line with the Companies Act 2006, a UK-based firm may have a corporation’s board of directors, under the condition it also has at minimum one director who is an individual. However, there is secondary legislation according to which there may be provided certain exceptions to this obligation. These are as follows:
- Any member of a corporation’s board must pass the registration process within the UK.
- Each director of a corporation’s board will have to be an individual.
- Any appointment of members of a corporation’s board of directors will be subject to those directors having gone via identity proof.
Corporate officers of other entities
As for now, there is no plan to enter the same limitations for corporate members of LLPs or corporate partners of LP. But the authority will take into account whether any next limitations on the use of corporate members of LLPs and corporate partners of LPs would help reduce the likelihood of abuse, without changing the legal use of these structures.
As stipulated in the application to the White Paper, there will be an obligation for an LLP to have at least one appointed member who is not an entity but an individual, however, this is not mentioned in the core part of the document.
At present, the identity of any individual whose name is provided to CH does not require verification, which makes the system open to misuse by those who want to do that way. The White Paper provides that all firms registered at CH will have at minimum one verified individual directly related to them at CH. For this purpose, there will be used photo ID, connecting a person through photography with an authorized identity paper.
For UK-incorporated firms, each director who is an individual will have to prove their identities. Failure to get registered within the set period will lead to offenses and potential fines. Any person with substantial control over a firm will also be obliged to pass verification. The same rule applies to LLPs, LPs, and some Scottish partnerships.
Boosting the level of clarity
Since there is insufficient data on the CH public register about stakeholders and beneficiaries, the authorities have a plan to enter obligations for:
- firms to indicate the full names of stakeholders; and
- private and certain other firms to provide a full list of stakeholders.
- UK`s registrar of companies
The position of CH will be changed from being a passive recipient of data to an active structure over business establishment and the custodian of more relevant details. Hence, it will have a new duty of promoting and keeping the integrity of the CH register. Particularly, it will be eligible to query data either prior to it being listed on the register or post-registration, on a discretionary basis.
Thus, new amendments to of duties of the Registrar will encompass the following:
- Strengthened power to delate material from the CH register where it affects the integrity of the register;
- Changing the address of a company’s office, where the Registrar can prove that the business is not allowed to use the address or it does not exist;
- Bettering “proper delivery” of filings;
- Enlarging the list of sensitive data that must not be publicly disclosed and others;
- Bettering financial data available at CH;
- For financial data, new regulations are the following:
- The firm`s accounts should be filed with CH in a virtual form applying the XBRL; the data should be comprehensively tagged.
- There will be two filing options: micro-entity and small company accounts, meaning that CH will obtain a balance sheet and PNL account for all small businesses, including microentities.
- Dormant businesses will be obliged to file an eligibility statements in which they will prove that the firm is not active and satisfies the parameters for filing dormant accounts.
The authorities will also work on a “file once” method which would make it possible for businesses to file their statements once a year with the authority, in place of submitting many filings at different times with a bunch of departments.
What is next?
It is expected that the UK authorities will lay down the mandatory legislation in Parliament shortly and that this will be supported by amendments at CH. The White Paper emphasizes that once entering the force, firms, directors, and others within the scope of the new regulations will need a transition period to adopt the new obligations.