Companies House identity verification
The UK Companies House Register is soon to require that all individuals who register companies or file with the Registrar will have to prove who they are by verifying their identity. This will apply to all new and existing registered company Directors.
For companies already on the Register, there will be a transition period to give existing Directors time to comply with the new requirements.
Authorised Corporate Service Providers
ACSPs will be required to declare that they have completed all the necessary identity verification checks when they contact the Registrar and Companies House.
A Companies House ACSP must be registered with a supervisory body for anti-money laundering (AML) purposes and have an existing obligation to carry out customer due diligence checks on all their clients.
ACSPs will need to confirm they are AML supervised and register with the Companies House Registrar before they are allowed to form companies or registerable partnerships, or to file on their behalf. Under AML regulations, all ACSPs are required to retain records and the Registrar can request further information on identity verification checks if necessary.
Identity Verification Deadlines
Identity verification of Directors must take place before any application for the formation of a company is submitted to the Registrar.
Post-incorporation, the identity of any new Director should be verified as soon as possible and before their appointment is notified by the company to the Registrar.
Individual PSCs will have a 14-day period after registration in which to verify their identity. For Relevant Legal Entities this period will be 28 days. Relevant Legal Entities will also need to provide the name of their verified relevant officer.
Anyone wishing to file documents with the Registrar will need to verify their identity before they are permitted to do so.
A transition period will provide existing companies with a set amount of time to comply with the new requirements. Those that do not comply by the end of the period may face criminal sanctions or civil penalties.
An individual who fails to comply with the requirement to verify their identity with the Registrar could be subject to:
- Criminal proceedings that could result in an unlimited fine
- Civil penalties issued by the Registrar of Companies
- Annotation of the public Register to show the individual’s status as ‘unverified’
- Prohibition from acting as a Director
When in force?
These measures will require new secondary legislation and guidance.
Subject to Parliamentary approval, Companies House has indicated that it expects the Bill to receive Royal Assent in Spring of 2023.
System Day Ltd is a UK-regulated agent that is permitted to undertake verification checks on all beneficial owners and managing officers of overseas entities.
We anticipate also being recognised by the Registrar as an ACSP under the new regime.
What is the government doing and why?
Individuals who register companies or file with the Registrar will have to prove they are who they say they are by verifying their identity. This will make it much harder to register fictitious directors or beneficial owners, stopping the vast majority of fraudulent appointments from reaching the Companies House register.
Identity verification will be a simple, quick process without significantly adding to the existing requirements on business. Businesses of all sizes will benefit from greater assurance from the Companies House register when they are consulting it to research potential suppliers and partners.
This will apply to existing directors, People with Significant Control, and those delivering documents to the Registrar. Companies already on the register will have a transition period in which to verify these identities. Identity verification requirements will also apply to all new registered company directors and People with Significant Control.
How will identity verification work?
There will be two types of identity verification: direct verification via Companies House, and an indirect route through an Authorised Corporate Service Provider.
If a person is verifying their identity directly with Companies House, identity verification will link a person with a primary identity document, such as a passport or driving licence. The person undergoing verification will take a photograph or scan of their face and the identifying document. The two will be compared, using likeness matching technology, and the identity verified. If successful, the person will be notified in a matter of minutes. Primary identity documents may also be checked against government databases as part of the identity checking process. Alternative methods will be available for individuals without photographic ID and digitally assisted / non-digital identity verification will be available for users who cannot use the digital identity verification system.
Identity verification by Authorised Corporate Service Providers (ACSP)
People might decide to use an ACSP to file with the Registrar, form a new registerable entity, or verify their identity. These are often intermediaries such as accountants, legal advisers, and company formation agents. They must be registered with a supervisory body for anti-money laundering (AML) purposes and already have an existing obligation to carry out customer due diligence checks on all of their clients; identity verification will build on these existing checks. These third parties must register with the Registrar and demonstrate that they are supervised for AML purposes. They will be known as ACSPs.
The identity verification checks undertaken by ACSPs will achieve the same level of assurance of the claimed identity as those undertaken through the direct verification route, and apply to all directors and People with Significant Control (PSCs). ACSPs will need to confirm they are AML supervised and register with the Registrar before they are allowed to form companies or registerable partnerships, or to file on their behalf. They will also be required to declare that they have completed all of the necessary identity verification checks when they interact with the Registrar and Companies House. Under AML regulations, all ACSPs are required to retain records and the Registrar can request further information on identity verification checks if necessary.
More information on how the government envisages the process of identity verification working is set out in the Corporate Transparency and Register Reform White Paper.
Who will this apply to and when will they need to verify?
Identity verification requirements will apply to all new and existing registered company directors, People with Significant Control (PSCs) and anyone else filing with the Registrar.
There will be a transition period for existing directors and their equivalents, and for PSCs to verify their identity in. This transition period will provide existing directors and PSCs time to comply with the new requirements, whilst ensuring the integrity of data already on the register.
For new directors, identity verification must take place before an application for the formation of a company is delivered to the Registrar. If PSCs are not verified within a short time after the incorporation of a company, they will commit a criminal offence. Post-incorporation, a director must verify their identity as soon as possible and must do so before their appointment is notified to the Registrar by a company. Individual PSCs will have a 14-day period after registering with the Registrar in which to verify their identity. For Relevant Legal Entities this period will be 28 days. Relevant Legal Entities will need to provide the name of their verified relevant officer.
Anyone wishing to file documents with the Registrar will need to verify their identity before they do so.
In general, we expect identity verification to be a one-off requirement. Once a person is verified, they obtain a verified status. However, there may be instances where re-verification is required, for example if someone changes their name. The events that will trigger the requirement to reverify will be set out in secondary legislation following Royal Assent.
What will happen if individuals don’t comply?
A transition period will provide existing companies with a set amount of time to comply with the new requirements. Those that do not comply by the end of the period may face criminal sanctions or civil penalties. The companies register will also be annotated to reflect their unverified status. The civil penalty regime and the annotation of the register to show an individual’s status as ‘unverified’ may be introduced by secondary legislation under existing and new delegated powers.
The consequences of non-compliance with the identity verification requirements will depend on circumstances. However, an individual who was under a requirement to verify their identity with the Registrar, and failed to comply with it, could be subject to:
- criminal proceedings – which could result in a level 5 fine
- civil penalties issued by the Registrar of Companies
- incorporations/registration of a new company being rejected
- being unable to file statutory filings
- the public register being annotated to show the individual’s status as ‘unverified’
For directors, failing to verify could also result in being prohibited from acting as a director.
There will also be a new offence, see Sanctions fact sheet which applies to the director or equivalent of an ACSP, of failure to notify the Registrar of changes to their supervisory body/bodies within a period of 14 days following the change.
When will this come into effect?
These measures will require new secondary legislation and guidance, as well as system development, following Royal Assent of the Bill.