Under recent laws announced by the Government, Corporations House reform will happen, requiring anyone who’s registering an organization to confirm their ID. On this post, we’ll explore what this implies for UK business owners. Let’s start.
Why is Corporations House reform crucial?
The role of Corporations Home is to:
- Register company information
- Make this information publicly available
In the intervening time, Corporations House accepts documentation in good faith. They’ve an obligation to simply accept properly presented information with little control in the case of ensuring that the corporate details they’re given – after which publish – are legitimate. Which means an organization might be incorporated with false or fraudulent information.
For instance, with some very basic personal information, reminiscent of a reputation and date of birth, a person could form an organization within the name of another person.
Whilst such activity is illegitimate, Corporations House has no statutory power to confirm the knowledge that they collect. That is all set to alter.
Corporations House to be granted recent powers
In recent times, this laissez-faire approach to company formation has drawn criticism from politicians and media outlets. Nevertheless, motion has now been taken.
The Economic Crime and Corporate Transparency Bill 2022 will give Corporations House recent powers that can allow the registrar to confirm the identity of any individual attempting to form a recent company or file documentation for an existing company.
If Corporations House isn’t satisfied that the ID information that has been provided is legitimate, they are going to give you the option to challenge and reject the knowledge.
GOV.UK: “Individuals who register firms or file with the Registrar could have to prove they’re who they are saying they’re by verifying their identity. This can make it much harder to register fictitious directors or useful owners, stopping the overwhelming majority of fraudulent appointments from reaching the Corporations House register.”
What’s identity verification and the way will it affect the corporate formation process?
Identity verification is the means of checking that a person is precisely who they are saying they’re. This could be done by various means – for instance, by checking information presented against registers utilized by banks and credit reference agencies, by electronic facial recognition, or by cross-checking an official document, reminiscent of a passport or driving license, with a current image of the person in query.
Examining the identity of a person is now considered a significant step in combatting identity fraud and the continuing growth of shell firms.
Exactly how identity verification might be implemented into Corporations House incorporation journey isn’t yet known. Nevertheless, the Government has confirmed that this might be ‘mainly via a digital’ service but there might be ‘alternative methods’ for anyone who’s reluctant or unable to supply their identity information online.
The Government will little doubt be taking the lead from company formation agents, reminiscent of Rapid Formations, and online challenger banks, reminiscent of Monzo and Tide, who allow their users – as a part of the onboarding process – to seamlessly upload their ID verification documentation and a picture of themselves via a smartphone.
Once uploaded, identity checks are sometimes accomplished inside a matter of minutes, allowing the user to proceed with their application.
What does this reform mean for you?
Ultimately, it depends upon where you’re on your enterprise journey.
Individuals who wish to establish a recent company with Corporations House could have an additional step added to their company formation, where they are going to must upload identity information for all directors and folks with significant control. As mentioned, there will even be an offline facility for providing this information.
Whilst it will lengthen the method, so long as the person tasked with the corporate formation has all of the crucial information handy – and the Corporations House mechanism for the upload is efficient – it shouldn’t greatly impact how long it takes to register an organization. Nevertheless, Corporations House offline facility is more likely to significantly impact formation times.
If the knowledge provided isn’t deemed suitable, Corporations House will reject the corporate formation:
“Where a question is raised by the registrar pre-registration, the filing might be rejected, and a reason provided. The entity will give you the option to re-submit the filing, ensuring that the query has been addressed, and supplying information whether it is required. Should a filing be re-submitted with the query remaining unaddressed or not resolved satisfactorily, it could proceed to be rejected.”
Directors and folks with significant control of existing firms that were arrange, without providing ID, might want to retrospectively provide identity documentation inside a set time period (to be defined in secondary laws).
Whilst not confirmed, it is predicted that a person will only must confirm their ID once, and never each time they complete a filing for his or her company (for instance, each time they file a confirmation statement).
What when you form your organization via an organization formation agent?
Whether you form your organization directly with Corporations House or through a third-party reminiscent of an accountant or company formation agent (like us), you’ll still must undergo the identity check process.
The method for providing the crucial identity information may differ barely depending on who you select to form your organization with.
In some ways, company formation agents have a head start. For quite a few years, they’ve been required to gather identity verification information for his or her customers and individuals with significant control (PSC). It is because they’re regulated by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, and Know Your Customer (KYC) guidelines.
Will my ID information be placed on the general public register?
Once you form and maintain a limited company, certain information in regards to the company and the individuals inside it’s placed on the Corporations House public register. It’s this transparency that makes the UK company structure so esteemed, and the Economic Crime and Corporate Transparency Bill has been brought in to guard (and enhance) this very thing.
Nonetheless, any concerns about personal information – reminiscent of ID documentation – being placed on the general public register is comprehensible.
It’s subsequently necessary to verify that copies of passports/driving licenses and pictures of people might be kept off the register and only be made available to (as set out on GOV.UK):
- Public authorities
- Law enforcement bodies
- Supervisory bodies
- Insolvency practitioners
When is that this Corporations House reform being introduced?
A precise date has yet to be confirmed, with GOV.UK stating:
“These measures would require recent secondary laws and guidance, in addition to system development, following Royal Assent of the Bill.”
We’ll make sure you keep you updated.
Thanks for reading
We hope you could have found this post on Corporations House reform informative.
If you could have any questions or comments about points raised on this post – or company formations generally – please don’t hesitate to get in contact.