Reforms to enhance identity verification measures

Thu 2nd Mar 2023

New identity verification measures could be introduced by the government later this year which would affect all companies in the South West, as Jack Peart from our corporate and commercial team explains…

Most of us have had to verify our identity several times in our personal or professional life, whether opening a bank account, applying for a passport, or setting up a new business.

So, it may not be that surprising to know that the government is pushing forward with its proposals to overhaul its identity verification systems at Companies House to make them more robust and less susceptible to identity fraud in the future.

These measures, which will affect all companies whether large or small, could be introduced this spring, as the relevant Bill is currently being discussed and considered in Parliament.

Company directors, Persons with Significant Control (PSC), members of Limited Liability Partnerships (LLP’s) and third-party agents are all likely to be impacted by the enhanced identity verification measures.

Directors

For directors, whether newly appointed or already in post, they will need to be verified to carry out any business on behalf of the company. Technically they must not work on the company’s behalf until this verification is in place. Directors will also need to confirm they have not been disqualified to act.

When submitting a new company application to Companies House, a statement will need to be supplied confirming all directors have been verified before the incorporation on the register, with necessary links to this information most likely being required. Failure to provide this will lead to Companies House rejecting the application.

For companies with corporate directors, those corporate bodies will also need to be fully verified at Companies House. Without this, it may lead to them being excluded as a director as well.

Persons with Significant Control (PSC)

Largely speaking, a PSC can be either an individual who owns at least 25 per cent of the company and will have 14 days after notifying Companies House of their status to verify themselves, to make sure an offence is not committed.

Alternatively, a PSC could be a corporate body and they will have 28 days after notifying Companies House of their status to verify themselves, with verification needing to be accompanied by confirmation from a verified director of that PSC. That director will also need to show the authority they have to complete this process.

If you are a PSC of a company, it will be important to check that the company has dealt with this for you, because there is no obligation on the company to complete this on your behalf.

Members of LLP’s

Members of LLPs will be expected to follow to the rules in line with directors above, with any identifiable PSC of the LLP, being subject to the same obligations as discussed already.

Agent Submissions

Where an agent, such as Coodes, is supplying the verified information on behalf of one of the groups listed above, they too will also need to be verified, confirming they have the person’s authority to submit the information on their behalf.

This will be a requirement over and above our current client due diligence checks.

Further guidance

The information being included as part of the verification process is still to be finalised but Companies House has provided some guidance in the meantime. There is speculation that each verified subject will end up with a gateway like HMRC already has in place.

Where no reasonable excuse can be given, failing to comply with the new measures will lead to a fine. In severe cases, where a person or body knowingly breaches the rules, it may even result in a prison sentence.

More proposals around corporate governance and management are set to be introduced if these reforms pass through parliament, and it is expected these will be rolled out gradually over time.

More help from Coodes

If you have any questions in relation to the potential impact of these reforms on your business, please do not hesitate to contact me by email at jack.peart@coodes.co.uk or telephone on 01872 246215.

Thu 2nd Mar 2023

Jack Peart

Associate

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