Economic Crime and Corporate Transparency

The UK has recently introduced the biggest changes to Companies House since 1844. That’s quite a headline. But it underlines just how important and serious the UK are when it comes to Economic Crime and Corporate Transparency.

The upcoming changes to UK Company Law are largely driven by the need to enhance transparency and improve governance.  The focus is on improving the quality of data held on the registers which will ultimately give greater power to tackle economic crime.  The data must be reliable to make significant progress in reducing the suffering caused by economic crime.  And that is the crux of the matter here.  Economic Crime can have devastating impacts on all of us either directly, or indirectly through the impact to the overall economic health of the country.  So whilst any changes are frustrating and increase the burden on companies and their directors, these changes are arguably long overdue.  Moreover, they are fundamental to driving dirty money out of the UK and strengthening the UK’s reputation as a place where legitimate business can thrive.

Let’s look at some of these new requirements.  For example, providing an email address registered to the company and the provision of an appropriate registered office address.  This isn’t an unreasonable request, but when anything is delivered, it is expected to come to the attention of a person acting on behalf of the company.   Is that always the case today?  It will mean that P.O. Box addresses are no longer acceptable as an appropriate registered office address, which, when you consider the intent of the changes, makes complete sense.

There is a renewed focus on identity verification for all directors and people with significant control.  As a result, new restrictions on the use of corporate directors will be enforced and each director of a corporate director must be a verified natural person. Legal ownership or control, however doesn’t give the full picture and so to prevent exploitation of the gap between legal owners and others, beneficial owners must be recorded and verified in the People with Significant Control (PSCs) register and the Register of Overseas Entities (ROE).

There is now, however, a real endorsement of using technology and e-filing capabilities.  Already gone are paper form submissions for filing company information such as incorporations and changes to the company.  In the next two to three years the UK will phase in software-only filing of accounts.  This is good news.  It means that as companies face more rigorous audit requirements the data is readily available.  Reporting standards are improved as software solutions ensure consistency and can apply validation and checks to keep everything in order.  This is turn lessens the administrative burden and streamlines the process.  Which ultimately means communication between companies and Company House becomes more transparent, frequency of information exchange is increased, improving accuracy and reliability of data on the Companies House register. This digital transformation isn’t just for the benefit of Companies House.  With digitalisation comes improved access to company data for all stakeholders, promoting greater transparency and informed decision-making.  As companies face more rigorous audit requirements to ensure financial transparency and accuracy, this digital transformation will greatly assist with the audit process.

So, in conclusion, the upcoming changes to UK Company Law are designed to enhance transparency, accountability, and governance, while also promoting sustainability and reducing administrative burdens. These reforms reflect the UK’s commitment to maintaining a robust and dynamic business environment that can respond to contemporary challenges and opportunities.

Are you ready?