Identity Verification Reform

The measures will apply to:

• all new and existing company directors;
• persons with significant control over a company;
• those filing documents with Companies House; and
• general partners of limited partnerships.

Individuals fulfilling such roles will be required to verify their identities with either Companies House or an anti-money laundering supervised authorised corporate service provider (ACSP).

What effect could the reforms have in practice?

Directors

• When incorporating a company, failure to include a confirmation in the application that the director’s identities have been verified would mean that the company will not be formed.
• Failure to notify Companies House of a director’s appointment is an offence by the company, and failure to include the mandatory statement that a director’s identity has been verified could result in a fine for the officers of the company. Separately, directors will be liable to a fine if their own identity has not been verified.

Persons with Significant Control (PSCs) and Relevant Legal Entities (RLEs)

• Companies must ensure that PSCs and the relevant officers of RLEs are verified and can be confirmed as such in their statement of initial significant control. While the statement is optional, if the subscribers do not make this statement, the PSC or RLE will have to make their own verification statement.

Individuals delivering documents to Companies House

• Individuals delivering documents to Companies House must have their identity verified and must deliver a statement alongside the document confirming that their identity has been verified.

General Partners

• General partners that are legal entities must specify the names of their registered officer when applying for registration of a limited partnership and such officer must have their identity verified.

The only exemption from identity verification is if the Secretary of State deems a person exempt based on 1) national security interests and 2) to prevent or detect serious crime.

Sanctions for failure to comply range from being prevented from filing statutory filings to criminal proceedings, which shows how seriously the government are taking their goal of a more transparent system.

This is only one of a series of reforms that are being proposed (see our article for other proposals). It remains to be seen what impact they could have if implemented but certainly the processes of incorporation and filings will require more steps than they do now.