The Economic Crime and Corporate Transparency Bill (the “Bill”), now passing through Congress, threatens to shake up the role and authority of the Companies House in the biggest reform in 170 years. In an attempt to reduce the use of corporations for economic crime, the bill would introduce background verification requirements for corporate directors and significant controlling persons (PSCs), as well as the annual requirement that corporations have a legitimate purpose. We have introduced a number of measures, such as verification.
The bill also heralds some significant changes to the way businesses engage with company houses. This may be done through a director, company secretary or other employee tasked with keeping CH’s records up to date, or through outside legal counsel.
Here’s a look at some of the key points in the bill that will affect businesses.
Expansion of CH authority
Companies House will take a more active role as a gatekeeper for corporate information, rejecting inconsistent information and gaining new powers to demand more information from companies. The registry could be amended without going through the courts, which is a welcome proposal and would also give new powers to impose civil penalties on violating companies and individuals.
To form a company, subscribers must ensure that they are not disqualified as directors and that the company is formed for legitimate purposes. The first director must also be identified (see below for more information on identification of all directors). There is speculation that the incorporation fee will be increased, but there is no official comment on this yet.
Identity verification of directors
Individuals must verify their identities to act as directors. However, even if the identity verification is not performed, the actions of the director will not be invalidated. All prospective directors are required to verify their identity before notifying Companies House of their appointment. Existing directors will be required to verify their identities after the law takes effect and before the company submits its first confirmation letter.
No details have yet been released as to how the identity verification will be conducted, but it could be done through Companys House’s own system (which has yet to be disclosed) or through an “authorized corporate service provider” that requires supervision. I can do it. For anti-money laundering purposes and to claim money laundering.
PSC identity verification
The identity of individual PSCs must be verified in the same manner as directors. If the PSC is a corporation or other entity, it must verify the identity of her one of its officers. PSCs must maintain verified status and non-compliance is a criminal offense with fines. The Company can verify her PSC’s identity, but it is her PSC’s ultimate responsibility to do so, and Company’s House has the power to compel her PSC to verify her identity verification. .
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The bill would require all businesses to provide a “proper” email address to Companies House. This will not appear on public registers, but it would be a crime to do so. Businesses must also ensure that their registered office is at a “proper address.” In both cases, “appropriate” means that the email or communication (posted or hand delivered) is brought to the attention of the person acting on behalf of the Company.
For greater transparency, all shareholders’ full names must be entered in the member registry. This can be an administrative burden for companies, especially if there are shareholders whose details are missing.
The company’s first verification statement after the law comes into force must include a full shareholder list, the company’s registered email address (see above), and confirmation that all directors have verified their identities. Annual statement that the company has a legitimate purpose and that its principal business activities remain the same (as evidenced by the SIC Code).
Providing information to company halls
The bill would tighten down who can provide information about companies, essentially ensuring that anyone who submits information to a company’s home has their identity verified and is authorized to do so on behalf of the company. The accredited corporate service provider must have permission from the company and must verify that the individual making the application is an active employee in the course of employment with the accredited corporate service provider. You can also apply on behalf of your company. .
The bill is likely to be amended during legislative passage, and many of the details will be included in regulation, such as how identity verification will work. We are monitoring the progress of the bill and will provide updates over the coming months.