The UK demands more information from its corporates
In this guest article, Mark Lucas, Partner for Moore Barlow, discusses The Economic Crime and Corporate Transparency Bill 2022 which is set to receive Royal Assent (that is, become law in the UK) this spring.
The UK was one of the first countries to require corporates to make public their beneficial owners in 2016. Many countries followed this lead. However, on 22 November 2022 the EU’s Court of Justice passed a judgment allowing, in effect, those who want to keep their names private to be removed from the relevant registers. This has caused some EU countries (eg The Netherlands and Luxembourg) to suspend public access to their registers of beneficial owners.
Of course, the UK is not affected by that judgment and remains committed to ensuring the highest levels of integrity in the information on the public register of companies. Indeed, it is pressing ahead and seeking to give more powers to Companies House so that it is an active gatekeeper of that information.
This is good news. The UK’s register has long been criticised for the ability of crooks to present it with incorrect information. The UK is seeking to stop the proceeds of crime being washed through its financial systems. The new law gives Companies House powers beyond its historical role as a central register and store. For example, it allows Companies House to:
- Verify the identity of new and existing directors, owners and those who deliver documents to it.
- Share data with law enforcement bodies.
- Demand such information as it wants to verify any submission.
- Analyse information for the purposes of crime prevention or detection.
- Impose fines (without any criminal prosecution) for breaches of the laws on disclosure of information.
The Bill also amends the financial disclosures required of small companies by.
- Requiring micro-entities (i.e those with two of a turnover of £632,000 or less, £316,000 or less on its balance sheet or 10 employees or fewer to file a profit and loss account – not just a balance sheet).
- Requiring small companies (i.e those with two of a turnover of £10.2 million or less, £5.1 million or less on its balance sheet or 50 employees or fewer) to file a directors’ report and unabridged accounts.
These changes are to be welcomed if they render the UK less open to criminal activity and misleading public information. They signal a change from a laissez-faire approach to an interventionist approach. This will come at a cost.
Ultimately, the cost of more accurate, more reliable is worth paying if it attracts good businesses to an environment where crooks and fraudsters are not welcome.