Companies House changes will fail without reforms

These reforms are designed to improve transparency over UK companies and other legal entities, and broaden Companies House’s powers so it can become a more active gatekeeper over company creation and custodian of more reliable data. The proposals form part of the Economic Crime and Corporate Transparency Bill, which is currently in the committee stage in the House of Lords. 

R3 believes, without changes to the legislation around the company dissolution process, its objective of addressing the misuse of UK company registrations and removals won’t be met.

Its vice president Nicky Fisher said: “The bill won’t improve transparency over corporate entities and tackle economic crime while companies are dissolved and struck off the Companies House register with no investigation into the conduct of their directors.

“At the moment, anyone who is looking to avoid investigation can do this by waiting till their company is struck off the register, as the option of restoring it via the courts to enable an investigation to happen is often too time consuming and expensive for the business’s creditors.

“This loophole needs to be closed if government wants this legislation to achieve what it’s intended to, and stop company law from being abused.”

Instead, R3 has said it would like to see companies who have failed to file accounts and confirmation by the Companies House’s deadline entered compulsory liquidation overseen by the government’s official receiver if the missed deadline isn’t rectified or the company put into voluntary liquidation within a month.

Fisher explained: “Putting a company automatically into a compulsory liquidation would make it easier for director misconduct to be investigated, for the business’s assets to be recovered earlier, and would send a warning to those people looking to commit fraud. 

“This approach would require additional resources, but these could be raised by making the business’s directors liable for the fees for the compulsory liquidation – and this would send a clear message to potential fraudsters that there are financial penalties for this crime, alongside being investigated and potentially imprisoned.”