Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog
Any individual who registers a company or who files with the Registrar will be required to provide that they really are who they claim to be through verification of their identity. As a result, it will become far more difficult to register a beneficial owner or fictitious director, and it is hoped that this will prevent most fraudulent appointments from being entered into Companies House’s register.
The process of verifying identities will be quick and simple with no significant burden being added to a business’s workload. Companies of all kinds and sizes will be able to benefit from the extra assurance from Companies House’s register too whenever they consult it to find out more about potential partners and suppliers.
Verification will apply to those who deliver documentation to the Register as well as People with Significant Control and existing directors. Any company that is on the register already will benefit from a period of transition during which they can verify these identities at any time.
All new People with Significant Control and company directors that are registering for the first time will require identity verification documentation too.
How Is The Process Of Identity Verification Going To Work?
There are going to be two different kinds of identity verification. The first is direct through Companies House while the second is indirect via an Authorised Corporate Services Provider.
When someone verifies their identity direct through Companies House, the verification will link the individual with their primary identity documentation, for example a driving licence or passport. The individual who is being verified must scan or photograph their face as well as the identity document so the two can be compared with matching technology to verify the identity.
An individual can be notified in just minutes when the process is successful. A primary identity document can also be checked against the government database during the process. For individuals who have no photo ID or who cannot use this system, alternative methods are going to be put in place.
Another option is to use an Authorised Corporate Services Provider to verify identities. These providers are typically intermediaries like legal advisors, company formation agents, and accountants but they must have registered for AML (anti-money laundering) purposes with one of the supervisory bodies and must also have an existing obligation to perform due diligence customer checks on their clients.
Such third parties will be required to register with the Register as well as to demonstrate that they are AML supervised.
Who Will Need To Verify Their Identity?
All existing and new registered PSCs (People with Significant Control), company directors any anybody else who files with the registrar will need to verify their identity. A period of transition will be implemented for existing PSCs and directors within which they must verify their identities.
For any new director, verification of identity has to take place before they can deliver their application to form a company to the Register. If a PSC remains unverified within 14 days following a company’s incorporation, they will be committing a criminal offence. After incorporation, the company director will be required as quickly as possible to complete their identity verification and certainty before the Registrar is notified about their appointment.
Identity verification will probably be a one-off requirement. After an individual has been verified, they will be given verified status. There may, however, be cases in which reverification will be required, such as if a name change takes place.
What Happens If An Individual Fails To Comply?
Existing companies will have a set transition period during which they must comply with all new identity verification requirements. Any that fail to comply once this period comes to an end may face civil penalties or criminal sanctions.
Furthermore, there will be an annotation of the company’s register to reflect that unverified status. Depending on circumstances the consequences arising from non-compliance with identity verification requirements will vary.
The possible outcomes could include criminal proceedings resulting in a level five fine, rejection of any registration or incorporation of a new company, a civil penalty being issues by the Companies Registrar, an inability to file any statutory filings, and an annotation in the public register to show an “unverified” status for an individual.
In the case of directors, a failure to verify their identity may result in a prohibition from acting in the role of a director in future.
A brand-new offence will also be introduced which will be applicable to directors or ACSP equivalents. This offence will relate to a failure to let the Registrar know about changes to an ACSP’s supervisory body within a 14 day period following that change.
When Will These Changes Take Effect?
New secondary legislation will be required for these measures as well as guidance and development of the system following the Bill’s Royal Assent. Therefore, it may be some time before these changes take effect.
Will Restrictions Be Imposed On Using Corporate Directors?
Restriction of the use of corporate directors is already within the government’s powers and these are going to be brought into force alongside this Bill together with regulations that are going to set out clearly the limited basis on which a company will be allowed to appoint or retain a corporate director in the future.
The regulations will make it explicitly clear that only those corporate entities that have a “legal personality” can be appointed as a corporate director and all of their directors must be “natural persons”. Those “natural persons” must, before being appointed to the role of corporate director, subject themselves to the appropriate process of identity verification.
Any company that already has corporate directors will have twelve months within which to comply and within this timeframe, they will be required to either make sure that their existing corporate director has complied with these conditions or, alternatively, resign them.
Any new company that appoints a corporate director will be required to ensure that they can satisfy these conditions from the moment the measure is brought into force.