Companies House reform series: Identity verification – what this means for directors and controlling shareholders of UK companies

The Economic Crime and Corporate Transparency Bill (the “Bill”), introduced to the House of Commons in September 2022, is expected to become law later this year. Its aim is to prevent the abuse of UK corporate structures and to tackle economic crime.

Our Companies House reform series will highlight key details from this new legislation. In the first of the series, we look at identify verification.

The Bill introduces identity verification for all new and existing:

• company directors
• controlling shareholders (persons with significant control); and
• those delivering documents to Companies House.

Who will perform identity verification?

The identity verification will be done:

• either by an individual directly with Companies House, or
• indirectly through an Authorised Corporate Service Provider (“ACSP”).

Accountants, legal advisers, credit institutions, financial institutions, insolvency practitioners and company formation agents who are registered with a supervisory body for anti-money laundering (“AML”) purposes and are under an obligation to carry out customer due diligence checks on their clients, could become an ACSP if they register with Companies House.

Who can deliver documents to Companies House?

There will be a restriction on who can file documents at Companies House:

• any individual delivering documents to Companies House on their own behalf must have their identity verified.
• filings on behalf of a firm can be done by an officer or an employee of the firm whose identity is verified.
• filings on behalf of another person can be done by:
  • an individual whose identity is verified by Companies House
  • an individual who is an ACSP
  • an individual who is an officer or employee of an ACSP.

What happens if a director has not been verified?

A company director will be prohibited to act unless his/her identity has been verified. If a person fails to verify their identity and continues to act as a director, they will be committing an offence and may be fined

When does verification need to be done?

Any new director’s identity will need to be verified within 14 days of appointment.

All existing directors will be given a transitional period within which their identity will have to be verified (this is expected to be by the time of filing the company’s first confirmation statement once the provisions of the Bill are in force).

The identity of any new person with significant control will need to be verified within a specified period after that person will become a registrable person with significant control (expected to be between 28 and 56 days).

All existing registrable persons with significant control will need to be verified within a specified period once the relevant provision of the Bill comes into force.

What’s happening to the statutory registers?

The Bill removes the requirement for a company to maintain its own register of directors, register of directors’ residential addresses, register of secretaries and register of persons with significant control. All relevant information will be held on the register at Companies House.

Registers of members will still be required to be maintained by each company. If shares are held by a nominee shareholder, the register of members of that company will need to state so and include the name and service address of the beneficial owners.

The Bill has completed its third reading in the House of Lords and the House of Commons will consider it amendments in September 2023. We will monitor the developments and, once the Bill receives Royal Assent, will be able to provide an update.

In the second instalment of our Companies House reform series, we examine the proposed reform of the Companies Registrar role.

If you would like a conversation to find out how we might help you or if you have any questions in relation to the above, please get in touch with Aselle Djumabaeva-Wood.