Beware of Companies House

Beware of Companies House

Companies House: we will find you, we will question you, and we (may) fine you.

Those of you who manage companies will know all about the exciting task of keeping various company filings up to date with the Registrar at Companies House. The introduction of the Economic Crime and Corporate Transparency Act 2023 (“the Act”), seeks to increase the accuracy and quality of information available on the public register, and to crackdown on unlawful activity.

It is rare that changes are made to company legislation in the UK. In 2016, the Persons with Significant Control regime was introduced. The purpose behind this regime was to increase transparency in determining the Ultimate Beneficial Owner of a company. Provided that the information filed is accurate, tracing the ultimate owner of a company is relatively simple from a review of the information held at Companies House.

From 4 March 2024, in accordance with the Act, the following main changes were introduced:

• the Registrar will have the power to query the information filed;
• the Registrar will carry out stronger checks on company names;
• stricter rules will be put in place relating to registered offices; and
• lawful purpose statements should be filed for each company.

Directors of companies can expect to be questioned by the Registrar about the information which is filed at Companies House. Any false or misleading information will be removed. The consequence of failing to respond to formal requests from the Registrar for more information will be a fine, annotation on the company’s record, or prosecution. The Registrar also has the power to speak with other governmental departments, including HM Revenue & Customs, to verify information.

Company names will be challenged to ensure that they are not misleading to the public. (There are already rules in place regarding what can and cannot be used as part of a company name, but the Act gives the Registrar greater powers in enforcing these rules).

Companies using PO Box addresses as their registered office will need to change the address. The registered office must be an appropriate address where a person can expect to receive the post. Upon incorporating a company, a registered email address must also be provided to the Registrar.

Companies are sometimes used as a front to unlawful activity, including terrorism and money laundering. The new requirement for lawful purpose statements to be filed at Companies House seeks to crack down on the use of companies for unlawful purposes. There will be no ‘hiding behind the corporate veil’, and directors will be expected to file a statement confirming that the company which they manage is not incorporated for any illegitimate purpose.

To support Companies House in implementing these changes, their fees are increasing from 1 May 2024.

It will no doubt take some effort for each of the 5 million companies registered in the UK to comply with the Act. We would recommend that, where you are reviewing and updating the filings made at Companies House, that you also revisit your Articles of Association and Shareholders Agreement.

The Articles are a public rule book (and legal requirement) whereas the Shareholders’ Agreement is a private contract between the company and its shareholders and is used to document things like restrictive covenants, the role/responsibilities of certain shareholders, more detailed share transfer provisions and some form of dispute resolution procedure in the event joint business owners no longer agree on matters in the future.

If you need guidance with the filings for your company or are now inspired to revisit that Shareholders’ Agreement which has been gathering dust, please contact the corporate team at Sherbornes..