Overview
The Act introduces compulsory identity verification procedures for all new and existing company directors, persons with significant control (PSCs) and agents who file information at Companies House.
Secondary legislation will be needed to clarify exactly how identity verification will work, but individuals will be able to verify directly with Companies House or through a registered third party provider – an Authorised Corporate Service Provider (ACSP).
Perhaps the most significant of the Act’s reforms is the introduction of compulsory identity verification procedures for all new and existing company directors, persons with significant control (PSCs) and agents who file information at Companies House. The main aim behind the new verification process is to prevent fraudulent or fictitious appointments of directors or beneficial owners from being recorded at Companies House.
Identity verification for directors
Once the new provisions are in force, all directors, both new and existing, will have to undergo identity verification, and the Act specifically prohibits directors (including shadow directors) from acting unless their identity has been verified. The Act also places an obligation on companies to ensure that individuals do not act as directors unless their identity is verified.
In practice, this means that until an individual’s identity is verified, a director should not take any actions on behalf of the company in their capacity as a director. If a person fails to verify their identity and continues to act as a director, they are committing an offence which is punishable by a fine. However, the director’s appointment and the actions they may have undertaken as a director will still be valid.
A company will also commit a criminal offence if it allows a director to act while unverified.
Timing
On incorporation, it will be necessary to confirm in the Companies House application form that the proposed officers of the new company have been verified. It will not be possible to incorporate a new company without this confirmation.
Post-incorporation, new directors will have to verify before their appointment is notified to Companies House (which must happen within 14 days of appointment).Â
For existing directors, there will be a transition period in which they will be given time to comply with the new verification requirements. All directors will be required to file evidence of their identity being verified at the same time as filing the company’s first confirmation statement after the provisions of the Act come into force.
Identity verification for PSCs
All new and existing PSCs will also need to verify their identity and maintain that verified status as long as they are registered at Companies House. Where the registrable PSC is a legal entity – a relevant legal entity (RLE), the entity will have to nominate a managing officer who is an individual and whose identity has been verified.
When the provisions of the Act come into force, new PSCs and RLEs will be able to be registered without having had their identities verified in advance. However, any new PSC must become verified and confirm that status to the registrar within 14 days of receipt of a notice from the registrar. RLEs will have 28 days from receipt of the notice to comply.
There will be a transition period during which existing PSCs and RLEs will have time to verify their identity. Companies that do not comply by the end of that period may face criminal sanctions or civil penalties.Â
How will identity verification work?
Regulations (yet to be published) will specify exactly how identity verification will work.
It is clear, however, that an individual will be able to verify their identity either through a facility provided by Companies House, or by using an authorised corporate service provider – ACSP (see below).
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. Alternative methods will be available for individuals without photographic ID.
Authorised Corporate Service Providers
As stated above, individuals might choose to use an intermediary or agent (an ACSP) to verify their identity, rather than using the facility provided by Companies House. The identity verification checks undertaken by ACSPs will achieve the same level of assurance as those undertaken by Companies House.
To obtain ACSP status, intermediaries and agents will have to be authorised by Companies House and be registered with a supervisory body for anti-money laundering purposes. They will be required to declare that they have completed all necessary identity verification checks when interacting with Companies House and will also be required to retain records relating to all identity checks.
Only ACSPs and verified individuals will be able to file documents at Companies House. This is a significant change from the current situation where anyone is able to deliver documents to Companies House.
Practical steps
Although identity verification is unlikely to become compulsory before Q4 2024, it would be useful for existing directors and PSCs to be aware now of this requirement and the need for identity documentation that will be used to verify their identity.
Companies should also consider who within their organisation currently files information at Companies House and be alert to the need for them to have their identity verified when the provisions come into force. Alternatively, companies may want to appoint an ACSP to carry out this function in due course.
