Covid-19 – end of certain relaxations for companies

Some of the relaxations afforded to companies to help them with administrative issues during the pandemic are no longer, or will shortly cease to be, available.

Shareholder meetings

The Corporate Insolvency and Governance Act 2020 (CIGA) contains provisions that temporarily relaxed the company meeting requirements in the Companies Act 2006 and allowed shareholder meetings to take place by electronic or any other means. These relaxations ceased to be available for meetings after 30 March 2021.

Companies House filing deadlines  

CIGA also granted automatic extensions for various filing deadlines under the Companies Act, including for filing accounts. These relaxations end for filing deadlines that fall after 5 April 2021. Companies House has confirmed that, whilst there is no longer an automatic extension, companies can still apply for a 3-month extension.

FCA extensions for financial reports

The FCA guidance which gives listed companies an additional two months to finalise their annual report, and an additional month to publish their half-yearly financial reports, remains in place.

Julie Farley
Julie Farley
+44 20 7466 2109

Barnaby Hinnigan
Barnaby Hinnigan
+44 20 7466 2816

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Consultations on corporate transparency and Companies House

BEIS has published three consultation papers setting out proposed reforms in relation to increasing the powers of Companies Houseimproving the financial information which is filed with Companies House and implementing a ban on corporate directors.

These consultations follow the Government’s consultation on options to enhance the role of Companies House and increase the transparency of UK corporate entities in 2019 (see our corporate update 2019/10) and the response it published in September 2020 (see our earlier blog post).

The consultations close on 3 February 2021. The Government says that it will confirm how it intends to proceed later in 2021 and notes that primary legislation will be required to implement most of the proposed changes.

Increasing the powers of Companies House

The Government is proposing a number of reforms to the powers of Companies House, which it says are designed to assist in its wider efforts to tackle economic crime and improve the integrity of information held at Companies House.

The proposals include:

  • Power to query information – Companies House would have the power to query information provided to it where there is an identified error, inaccuracy or anomaly which appears to be fraudulent, suspicious or might impact significantly the integrity of the information at Companies House or the UK business environment. It is proposed that Companies House would be able to query information both prior to it accepting information for filing (in which case the document will be rejected) and following registration of a document (in which case, Companies House may remove information from the register if it does not receive a satisfactory response to its query). The consultation paper says that where a filing has legal effect (for example, company incorporations or change of registered office address), removal of that document from the register should be a matter for the court in the majority of cases.
  • Company names – Companies House would have the power to query company names, both prior to and following registration of a company name. The consultation paper also discusses possible amendments to The Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2014 to widen the list of sensitive words in order to close loopholes identified in the current regime.
  • Power to remove information from the register – Companies House would have greater power to remove information from the register. Examples as to how this power may be used are given in relation to registered office changes and the removal of a director’s details.
  • Company registers – In its September 2020 response paper, the Government stated that it intends to proceed with the proposal that identity verification must take place before a person can be validly appointed as a company director. In light of this, it is consulting on removing the requirement to keep a register of directors and on whether certain other statutory registers should be maintained.

Financial information filed at Companies House

The Government is proposing a number of measures to improve the quality and value of financial information which is filed at Companies House.

The proposals include:

  • Timescale for filing accounts – The consultation paper seeks views on reducing the timescale for filing accounts at Companies House. The Government says that this will improve accuracy as financial information is often significantly out of date before it is filed with Companies House. Views are sought on the impact of shortening the filing deadlines to three months from financial year end for public companies and six months for private companies.
  • Digital filing of accounts – Currently certain company accounts may be filed in paper form. The Government is proposing that all accounts should be filed digitally at Companies House.
  • Tagging of financial information – The Government is proposing that financial information contained in accounts should be fully tagged, for example using extensible business reporting language (XBRL). As tagged information is computer readable, the Government says that the information can more easily be checked for accuracy and compared. It also says that tagging of accounts should not add significant burdens and notes that HMRC already requires accounts to be submitted to them fully tagged.
  • “File once with Government” – The Government notes that many respondents to its 2019 consultation raised the issue of being able to file financial information once and in a way that could be used by multiple Government organisations (for example, HMRC). The consultation paper seeks further views on this.

Ban on corporate directors

The Government is proposing to introduce a ban on corporate directors. Currently only one director on a company’s board must be a real or “natural” person. Any others may be corporate directors, i.e. other companies or legal entities. The Government says that the use of corporate directors can provide a screen behind which to conduct illicit activity and weaken corporate governance by preventing individual accountability.

The power to ban on corporate directors is contained in the Small Business, Enterprise and Employment Act 2015 (see our corporate update 2015/7) but has never been brought into force. The Government is now proposing to use that power.

In the consultation the Government is seeking views on exceptions to the ban. It is proposing to create a principles-based exception to allow a company to be appointed as director if:

  • all of its directors are natural persons; and
  • those natural person directors are, prior to the corporate director appointment, subject to the Companies House identity verification process.

A company will be required to take all reasonable steps to assure itself that any corporate director has (and continues to have) no corporate directors and confirm this in its annual confirmation statement to Companies House.

The Government says it is also minded to apply the ban to general partners and members of limited partnerships and limited liability partnerships.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Julie Farley
Julie Farley
+44 20 7466 2109

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Filing accounts and confirmation statements

Companies House has said that it will no longer provide paper reminders to file confirmation statements and accounts. Companies can instead register to receive email reminders through the WebFiling service.

Companies House is also asking companies to submit accounts early and preferably online. Paper accounts are six times more likely to be rejected compared to accounts filed electronically and, as a result of the pandemic, it is taking longer than usual to process paper filed accounts.

The Companies etc. (Filing Requirements) (Temporary Modifications) Regulations 2020, which were made under the Corporate Insolvency and Governance Act 2020, temporarily extend various filing deadlines under the Companies Act. For accounts, the deadline was extended by three months, to 12 months for a private company and nine months for a public company (see our corporate update 2020/14). The longer filing periods apply to filing deadlines that fall between 27 June 2020 and 5 April 2021 (inclusive).  Companies House Guidance notes that the revised filing dates can be checked via the Companies House Service.

If accounts are rejected close to the filing deadlines, there may not be enough time for corrected accounts to be processed and an automatic late filing penalty may be incurred (although Companies House has said that appeals will be treated sympathetically if accounts are delivered late as a direct result of the pandemic).

Julie Farley
Julie Farley
+44 20 7466 2109

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Mark Bardell
Mark Bardell
+44 20 7466 2575

Government response on corporate transparency and Companies House consultation

The Department for Business, Energy and Industrial Strategy (BEIS) has published its response following its consultation on options to increase corporate transparency and enhance the role of Companies House.

The key changes, which BEIS consulted on in 2019, are:

  • Knowing who is setting up, managing and controlling companies – The government will introduce compulsory digital identity verification checks for directors, people with significant control (PSCs) and people who present company information. Shareholders will not be subject to identity verification but companies will be required to provide full names for shareholders.
  • Improving the accuracy and usability of information on the register – Companies House will be given discretion to query and check information before it is placed on the register, and the process for amending or removing inaccurate information will be simplified.
  • Company accounts – The government will consult further on measures to introduce full electronic tagging for accounts submitted to Companies House (listed companies will be required to do this in any event from 1 January 2021 – see our earlier post on this issue) and reform of the rules on shortening accounting reference periods.
  • Company names –  Companies House will have the power to query proposed company names before they are registered and the role of the Company Names Adjudicator will be reviewed.

The government will develop the proposals, consult further where necessary and introduce the necessary legislation when parliamentary time (and the necessary funding) allows.

Julie Farley
Julie Farley
+44 20 7466 2109

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Ben Ward
Ben Ward
+44 20 7466 2093