Corporate Governance & Regulation

The Economic Crime and Corporate Transparency Bill has completed its initial journey through the House of Commons and the House of Lords and is now at the stage known as, consideration of amendments. This is where the second House’s amendments are considered, and the Bill may go back and forth until both Houses agree on the Bill. The Bill is expected to receive full Royal Assent over the coming months. The new Act will be aimed at reducing the abuse of corporate structures and at the same time tackling economic crime.

As part of the measures that will be introduced, Companies House will be streamlining the accounts filing options available to small and micro companies. At present, small businesses are able to file what are known as filleted accounts with Companies House. This means that these small or micro companies can choose not to submit a profit & loss account and/or director’s report to Companies House. In this way, this information will not be made public. Filleted accounts can be submitted whether or not a company has prepared full or abridged accounts.

Companies House has now acted on various concerns that this minimal level of disclosure has the potential to appeal to fraudsters wishing to present a false image of the company.

Companies House will therefore introduce a new framework under which all small companies, including micro-entities, will be required to file their profit and loss accounts. The option for abridged accounts will also be removed. 

A small company is defined as a business with two of the following:

• a turnover of £10.2 million or less
• £5.1 million or less on its balance sheet
• 50 employees or less

A micro-entity is defined as a business with two of the following:

• a turnover under £632,000
• £316,000 or less on its balance sheet
• 10 employees or fewer.

No date has yet been announced for the implementation of these changes. However, it is important that those who currently submit filleted or abridged accounts familiarise themselves with the upcoming changes and how best to prepare for them. This represents a significant change for these businesses.

There are a number of reasons why you may consider closing your limited company. This could be because the limited company structure no longer suits your needs, your business is no longer active, or the company is insolvent. You will usually require the agreement of all the company’s directors and shareholders to close down the company.

The method for closing down a limited company depends on whether it is solvent or insolvent. If the company is solvent, you can apply to get the company struck off the Register of Companies or start a members’ voluntary liquidation. The former method is usually the cheapest.

It is the responsibility of the company directors to ensure that all of a company’s assets and liabilities are dealt with before it is dissolved. For example, that you have settled any outstanding bills and collected all debts owed to the business. Any assets or rights (but not liabilities) remaining in the company at the date of dissolution can pass to the Crown as ownerless property.

Where a company is insolvent, the creditors’ voluntary liquidation process must be used. There are also special rules where the company has no director, for example if the sole director has passed away.

A company can also elect to become dormant. A company can stay dormant indefinitely. However, there are costs associated with this option. This might be contemplated if, for example, a company is restructuring its operations or wants to retain a company name, brand or trademark. The costs of restarting a dormant company are typically less than forming a new company.

Companies House has issued a news update targeted at companies who are due to file accounts by the end of September 2023. Generally, this would be for accounts ending 31 December 2022.

In their update they said:

All limited companies, whether they trade or not, must deliver annual accounts to us each year. This includes dormant companies.

Running your own company can be exciting but also challenging. Directors have lots of responsibilities including keeping company records up-to-date and making sure they are filed on time. You need to understand your role as a director, the importance of remaining compliant and how late filing could affect your company.

Missing your filing deadline could affect your credit score or access to finance. It can affect how others view your company and whether they want to do business with you. There are also financial penalties and legal consequences – you could get a criminal record, a fine or disqualification.

If you file using Companies House online services, we will send you an email to confirm we have received your accounts. We will send you another email when we have registered your accounts.

The penalties for late filing are:

There is a significant amount of information about companies that can be obtained from Companies House. Companies House is responsible for incorporating and dissolving limited companies, examining and storing company information and making company information available to the public.

Much of this information is freely available. This is in line with the government’s commitment to free data and means that all publicly available digital data held on the UK register of companies is accessible without a charge.

This includes:

• company information, for example, registered address and date of incorporation;
• current and resigned officers;
• document images;
• mortgage charge data;
• previous company names; and
• insolvency information.

There is also a service called WebCHeck that allows you to view a company's filing history and purchase copies of document images and a selection of company reports for a nominal fee. You can also elect to monitor a company and receive email alerts of any new documents filed at Companies House. This can be a useful resource to check your own company records at Companies House to ensure there no unexpected filings.

There are a number of reasons why you may look to close your limited company. This could be because the limited company structure no longer suits your needs, your business is no longer active, or the company is insolvent. You will usually need the agreement of all the company’s directors and shareholders to close down the company.

The method for closing down a limited company depends on whether it is solvent or insolvent. If the company is solvent, you can apply to get the company struck off the Register of Companies or start a members’ voluntary liquidation. The former method is usually the cheapest.

It is the responsibility of the company directors to ensure that all of a company’s assets and liabilities are dealt with before it is dissolved. For example, you have settled any outstanding bills and collected all debts owed to the business. Any assets or rights (but not liabilities) remaining in the company at the date of dissolution can pass to the Crown as ownerless property.

Where a company is insolvent, the creditors’ voluntary liquidation process must be used. There are also special rules where the company has no director, for example if the sole director has passed away.

A company can also elect to become dormant. A company can stay dormant indefinitely, however there are costs associated with this option. This might be done if for example a company is restructuring its operations or wants to retain a company name, brand or trademark. The costs of restarting a dormant company are typically less than starting with a new formation.

The Register of Overseas Entities came into force in the UK on 1 August 2022. The register is held by Companies House and requires overseas entities that own land or property in the UK to declare their beneficial owners and / or managing officers.

Overseas entities that already own UK property were required to register with Companies House and provide details of their registrable beneficial owners and / or managing officers by 31 January 2023. 

This applies to overseas entities who bought property or land on or after 1 January 1999 in England and Wales, 8 December 2014 in Scotland and on or after 1 August 2022 in Northern Ireland. 

Entities that disposed of property or land after 28 February 2022 will also need to give details of those disposals.

Information on the register will be available to HMRC and will be used to help identify offshore tax non-compliance of:

• overseas legal entities
• overseas legal arrangements
• beneficial owners (including settlors, beneficiaries etc).

After registering, the overseas entity will get a unique Overseas Entity ID to give to the land registry when it buys, sells, transfers, leases or charges UK property or land. 

Companies House is currently receiving a high volume through the service, so it may take longer than usual to process applications.

There are a number of ways you can check if a company is in liquidation. This can include searching the Companies House register. Companies House is responsible for maintaining a register of company information such as annual returns and annual accounts. This information also includes insolvency details although this can take some time to be updated and made available to the public.

When a company enters administration, liquidation or receivership, the appointed Insolvency Practitioner is required to post announcements in the London Gazette. The Gazette also has a search facility, but it can be difficult to find the exact information you are looking for, of companies involved in insolvency proceedings.

There are three main types of liquidation:

• Members’ voluntary liquidation (MVL) – which means the directors have made a statutory declaration of solvency.
• Creditors’ voluntary liquidation (CVL) – which means that the directors have not made such a declaration.
• Compulsory liquidation – this happens when a company is ordered by a court to be wound up.

The Companies House register can be used to find if a company is being wound up (liquidated) or if a company is in ‘provisional liquidation’. This means a court has frozen the assets of a company in advance of a hearing to decide if it should be liquidated.

A company comes to a legal end when it is dissolved. However, one if the important points to be aware of when doing so is that the dissolved company can no longer do or receive anything including receive a tax refund. It is the responsibility of the company directors to ensure that all of a company’s assets and liabilities are all dealt with before it is dissolved.

Any assets or rights (but not liabilities) remaining in the company at the date of dissolution will pass to the Crown as ownerless property. This happens under what is known as 'bona vacantia' which literally means vacant goods. The bodies that deal with bona vacantia claims vary across the United Kingdom, but they all ultimately represent the Crown.

Only formally dissolved companies are caught by bona vacantia. A company 'in liquidation' or 'being wound up' is on its way to being dissolved but is still in existence. Until the company is dissolved its property and rights will not be bona vacantia.

It may also be possible for a company to apply to be restored to the register if it was dissolved less than six years ago. This would mean that the bona vacantia ceases to exist. However, this process is by no means straightforward, and any assets or rights owned by the company should be properly dealt with before a company is dissolved.

Companies that are dormant or qualify as a small company or ‘micro-entity’ can choose to send a simpler set of accounts known as abridged accounts to Companies House and do not need to be audited. These abridged accounts contain a simpler balance sheet and mean that less information about the company will be available in the public domain.

A company is usually classed as dormant by Companies House if it’s had no ‘significant’ transactions in the financial year to be reported.

A small company is defined as a business with two of the following:

• a turnover of £10.2 million or less;
• £5.1 million or less on its balance sheet;
• 50 employees or less.

A micro-entity is defined as a business with two of the following:

• a turnover under £632,000;
• £316,000 or less on its balance sheet;
• 10 employees or fewer.

If your company is a micro-entity, you can:

• prepare simpler accounts that meet statutory minimum requirements;
• send only your balance sheet with less information to Companies House; and
• benefit from the same exemptions available to small companies.

Abridged accounts can only be sent with the agreement of all the company members.

The Money Laundering Regulations (MLR) are designed to protect the UK financial system and put in place certain controls to prevent businesses being used for money laundering by criminals and terrorists.

HMRC has named 68 estate agents that have been fined a total of £519,645 for not complying with rules designed to stop criminals laundering money from illegal activity.

Tax evasion is a criminal offence that can lead to money laundering, for example, the sale price of a property may be set below the Stamp Duty threshold by manipulating the price of furniture and fittings. Tax may also be evaded by hiding behind complex legal structures. 

HMRC’s guidance says that money laundering can take many forms, but in the property sector it often involves:

• buying a property asset using the proceeds of crime and selling it on, giving the criminal an apparently legitimate source of funds
• criminals may also hide behind complex company structures and multiple accounts to disguise the real purpose of a transaction and hide its beneficial ownership
• a more direct method may involve paying an estate agent or auctioneer a big deposit and reclaiming it later
• the money for a purchase may be the result of mortgage fraud.