Government Companies House changes will fail without reforms, R3 warns
Government efforts to reform Companies House won’t achieve their aims without closing risky loopholes, insolvency and restructuring trade body R3 has warned.
The Economic Crime and Corporate Transparency Bill aims to address the misuse of UK company registrations and removals by reforming the powers of Companies House, but R3 believes that without changes to the legislation around the company dissolution process, this objective won’t be met:
“The Bill won’t improve transparency over corporate entities and tackle economic crime while companies are dissolved and struck off the Companies House register with no investigation into the conduct of their directors,” Nicky Fisher, Vice President of R3 explains.
“At the moment, anyone who is looking to avoid investigation can do this by waiting till their company is struck off the Register, as the option of restoring it via the courts to enable an investigation to happen is often too time consuming and expensive for the business’s creditors.
“This loophole needs to be closed if Government wants this legislation to achieve what it’s intended to, and stop company law from being abused.”
R3 would like to see companies who have failed to file accounts and confirmation by Companies House’s deadline entered into a Compulsory Liquidation overseen by the Government’s Official Receiver if the missed deadline isn’t rectified or the company put into voluntary liquidation within a month:
“Putting a Company automatically into a Compulsory Liquidation would make it easier for director misconduct to be investigated, for the business’s assets to be recovered earlier, and would send a warning to those people looking to commit fraud,” Nicky Fisher says.
“This approach would require additional resources, but these could be raised by making the business’s directors liable for the fees for the Compulsory Liquidation – and this would send a clear message to potential fraudsters that there are financial penalties for this crime, alongside being investigated and potentially imprisoned.”
With the Economic Crime and Corporate Transparency Bill approaching the Committee Stage in the House of Lords, R3 is urging Peers to make these amendments to the draft legislation before it completes its Parliamentary journey:
“Fraud affects millions of people and costs the UK billions of pounds a year,” Fisher says. “Through this Bill, the Government has a great opportunity tighten the powers of Companies House and strengthen its efforts to tackle it.
“We urge it take it by adopting these amendments – instead of waiting for another opportunity while people, businesses and the economy suffer at the hands of fraudsters.”