These reforms are designed to enhance transparency and to make tracking and investigating financial crimes simpler. However, it is worth noting that their administrative implications will have the most impact on small businesses. Nicola Vernon, an associate solicitor in our Corporate team, discusses the reforms in more detail.
A Factsheet published on the Government website states that the changes being brought in by the Economic Crime and Corporate Transparency Bill will “deliver a suite of wider-ranging reforms to tackle economic crime and improve transparency over corporate entities”.
The Companies House reforms include, amongst other changes, the following:
Historically, the changes that have been made to the Companies House filing requirements were intended to make the system more transparent, particularly in respect of being able to identify the ultimate ownership of a company.
However, the removal of the annual return and introduction of the Confirmation Statement, has, in many cases, in fact only succeeded in making the process less transparent, as the documents that are actually available to be viewed often contain little or no information if there have been no changes during the period. This means that in order to identify the shareholders of a company, in certain cases you may need to trawl back through numerous filings until you locate one that actually contains a list of shareholders. This does not feel like a more transparent system.
The changes certainly appear to have the potential to improve transparency by increasing the information publicly available. However, it will also increase the regulatory burden on small companies and increase the costs associated with regulatory compliance.
It is therefore important that all UK businesses familiarise themselves with the proposed Companies House reforms and make adequate preparations to ensure that they can comply to avoid the new, more stringent penalties coming into force.
To help ease you into this new era, we have compiled some useful frequently asked questions on how the new Companies House reforms are likely to impact your business.
It is small companies that will be affected by the reforms. Small companies are defined as those that meet at least two of the following criteria:
The criteria means that most companies will be considered to be small companies.
This will partially depend on the size and structure of the company. However, some potential impacts include:
There will also be a requirement for all limited companies to file their profit and loss account at Companies House. Micro-entities will also need to file their profit and loss account but will remain exempt from needing to file a Director’s Report.
There is currently no timescale for when the Companies House reforms may be introduced. However, the first stage of legislation – the Economic Crime and Corporate Transparency Bill 2022 – is already going through the legislative process.
To find out more about how these changes may impact your business and how we can assist with the transition process, please contact Nicola Vernon.Contact us
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