Member Article

In October 2013 the Department for Business Innovation & Skills (BIS) published a consultation on company filing requirements as part of its Red Tape Challenge (RTC) to reduce unnecessary regulatory burden.

The consultation aims to consider where opportunities may exist to improve and simplify the current requirements for companies to file certain information with the Registrar of Companies at Companies House. In particular it seeks views on options to remove duplication of effort, particularly where the same information must be filed more than once or in two places, e.g. Companies House and HMRC.

The consultation includes the following proposals:

Annual return

There is duplication of some information in an annual return where it has already been filed with Companies House following an event taking place, e.g. change of directors. It is also currently necessary to file an annual return where there have been no changes. Critics argue that submission of the annual return is a burden on business and is not a requirement of EU law.

The consultation proposes one of three options: (a) replace the annual return with a simple annual confirmation that the information held on the register is correct (e.g. with a check and amend system); (b) rely on event driven filing only; or (c) align the filing date of the annual return with that of filing the accounts.

Accounts

At present, private companies must file accounts at Companies House within 9 months following the company’s end of year and they must also file a return to HMRC within 12 months. The RTC highlighted that many companies would like to be able file both documents together at the same time. Although there is a joint filing tool BIS recognises that it must be improved and made easier to use. BIS proposes to explore options to improve the filing experience and improve its systems to facilitate simultaneous filing of accounts on a single date for those companies that wish to do so. However, no changes to the dates for filing are currently envisaged. BIS is seeking views on the impact of aligning filing dates for accounts at both HMRC and Companies House.

Company registers

The Companies Act requires companies to hold registers available for inspection by third parties as well as sending information to Companies House to be made available on the public register. The RTC questioned the need for such duplication of information. Although company registers contain some information that is not available publicly (e.g. certain details of shareholders) and are more likely to reflect the current position of the company than the public register, the information will be the same in the case of smaller companies where the shareholders and directors are the same people. Such companies may find it onerous to be contacted by third parties requiring information from a register which holds identical information to that held by Companies House.

BIS proposes one of two options: (a) where the company directors and shareholders are the same people, removing the requirement to make their company registers available to the public; or (b) amending the Companies Act to allow private companies the option of holding some of their company registers at Companies House rather than their registered office.

Dates of birth

Since date of birth is used frequently in identity theft, BIS proposes that details of directors’ dates of birth in their entirety should no longer be made publicly available. However, this may create issues of identifying directors with the same name.

BIS proposes one of two options: (a) Companies House collects the date of birth, but does not make it publicly available; or (b) Companies House collects a date of birth and makes it partially available on the register, e.g. only the month and year of birth.

Statements of capital

Statements of capital must be produced on incorporation, annually and every time share capital is altered.

BIS is seeking views on proposals to (a) standardise all requirements within the Companies Act where a statement of capital is required; (b) remove the requirement for companies to report twice within a year, if updates to the statement of capital have been made within the previous 12 months; and (c) amend section 555 of the Companies Act to rely on Articles of Association to provide information on allotment of shares.

Disclosure of subsidiaries

Large multi-national groups with complex structures have led to suggestions that overseas subsidiaries could be used for tax avoidance purposes and calls for greater tax transparency by such companies.

BIS proposes one of two options: (a) requiring companies to state the total number of subsidiaries in their group whenever they provide information about them; and/or (b) requiring companies to report their subsidiaries in one place, as part of their annual accounts.

Company email addresses

It is proposed that companies be required to supply an email address to Companies House on incorporation and to keep the email address up to date. Existing companies will have the option to supply an email address. If an email address is supplied, Companies House will undertake all communications electronically, although certain final notices, such as in relation to strike off, will continue to be sent in hard copy.

Additional public information

BIS is seeking views on whether there should be an option for companies to supply the Registrar with additional information for the public register (e.g. company website) to assist generation of business.

Integrity of data

To increase the integrity of data on the register, Companies House can either implement additional checks and processes before registration (e.g. identity checks) but which may slow down the registration process, or develop faster and more effective methods to deal with issues when they arise. BIS is seeking views on whether there is the right balance right between upfront validation and verification and quick and effective remedy.

Registered offices

There are a small number of companies fraudulently using a registered office with which they have no connection. It is proposed to require all companies to have a demonstrable link to their registered office address using one or more criteria.

Director disputes

It is proposed that new directors are no longer required to provide their consent to act to the Registrar, but the company will have to confirm to the Registrar that the company has the consent of any new director to add them to the register. This consent agreement to be a director would be held by the company and the director, not the Registrar. The company would be required to retain evidence of the individual’s consent to become a director and in the event of a dispute about whether a director has ever been appointed Companies House will request sight of the evidence. If this is not produced, the director’s details will be removed from the register.

Accelerated strike off

The Registrar can strike off a company, if there is reasonable cause to believe it is neither carrying on business nor in operation, as set out in section 1000 of the Companies Act. Currently, this process takes at least 6 months, allowing creditors sufficient time to register an objection. If objections are received, it takes even longer. However this allows fraudulent companies to continue trading. An accelerated process of around 6 weeks is proposed to allow that in some cases (e.g. when an address is hijacked), and where no contact can be made with the company or its directors.

Next steps

The consultation closes on 22 November 2013. It is not yet known when a government response will be published.

To view the consultation document click here