As part of the government’s aims to increase corporate transparency and reduce the use of UK companies for criminal purposes, the Department for Business, Energy and Industrial Strategy has put forward new legislation (Part Two of the Economic and Corporate transparency Bill).
This proposes measures to reform Companies House and give the Registrar of Companies additional powers to maintain the accuracy of the UK’s record of companies.
In this article, we summarise some of the proposals, which include measures to prevent the abuse of limited partnerships and are likely to affect the way businesses prepare and file their accounts in future.
The Bill aims to simplify and streamline the filing obligations for small companies and micro-entities by separating the legal requirements into two distinct sections. The amendments also seek to ensure that key information is retained on the public register, where it would previously have been unavailable to the public.
Small companies will no longer have the option to prepare and file abridged or fileted accounts. This means that they would be required to file accounts that include a profit and loss account and directors’ report. Previously this information would have been prepared by the company but would not be filed, therefore unavailable to the public. Where a company is seeking an exemption from the requirement to have accounts audited (for example because it is categorised as a ‘small company’) directors would be required to make a statement confirming that the company qualifies for an exemption (see below).
Micro entities will also be required to file their profit and loss account but will continue to have the option not to prepare or file a directors’ report. As with small companies, this information would have been previously prepared by the company but would not be filed, therefore unavailable to the public.
Exemption from audit
The new rules would also require directors to identify the exemption from audit being taken and to confirm that the company qualifies to take it. The aim of the proposed legislation is to reduce the risk that entities are falsely claiming an exemption from audit that they may not be entitled to
The Bill aims to tackle the perceived misuse of limited partnerships and modernise the law governing them. It proposes:
- An increase in the registration requirements for new limited partnerships;
- Requiring limited partnerships to maintain a connection to the UK;
- Increased the transparency requirements; and
- Enabling the registrar to deregister limited partnerships, in certain circumstances.
Companies House reform – next steps
The Bill will also introduce new objectives for Companies House to promote and maintain the integrity of the register and give the registrar additional powers to support these objectives. This will include the power to reject and query new filings, as well as to query information already on the register to verify the integrity. In addition, the registrar will have greater powers to remove information from the registry and the ability to reject documents that contain inconsistencies or appear incomplete. Documents that have been rejected will be considered not to have been delivered. In addition, the registrar will be given the ability to mandate a method of delivery for documents. This could lead to the requirement in the future for accounts to be submitted electronically using an IXBRL format.
It is anticipated that this Bill will be enacted by Spring 2023 and so we suggest all entities review these changes to see if they will be affected. Please note that the matters highlighted above do not constitute an exhaustive list and the legislation is still subject to amendment during the Parliamentary process.
If you would like advice on any of these issues, then please get in touch and we would be happy to support any accounting, audit or company secretarial requirements that you may have.