Companies House plans to wipe details
Today's front page of The Times reports that Companies House is considering wiping off from the register details of millions of companies that have gone into liquidation or were 'struck off' more than six years ago.
Under current rules application to reinstate a company can be made at any time within 20 years (subject to certain conditions). Hence records on all companies remain on the register for that period of time.
Companies House's considerations are as a result of representations from former directors who want to 'move' on from being associated with such dissolved companies, many of which might have been liquidated/'struck off' through no fault of the directors themselves. Critics are worried that such a move will obstruct investigations into major fraud, money laundering and corruption as well as be contra to the governments dream of greater 'corporate transparency' as shown by the introduction of the PSC (register of persons with significant control').
Why six years?
The representations against the records being held for so long quote the Data Protection Act 1998 but that gives no date by which personal records should be destroyed; it just states that authorities should not hold personal information 'for longer than necessary'. Reference to six years can be found in two separate acts - the Insolvency Act 1986 (IA) and the Small Business, Enterprise and Employment Act 2015 (SBEEA) which refers to pre-pack administrations and the sale of company assets to ‘connected persons’.
The regulations contained in the IA deal with pheonix trading companies and prohibit any person who has been a director or shadow director of a company at any time for a period of 12 months preceding that company entering liquidation from carrying out the following for a period of five years following liquidation:
- Be a director of a company that operates with a similar name or trading style (so close to infer an association with the liquidated company)
- Be involved in any way (whether that be directly or indirectly) in the promotion, formation or management of another company with a similar name or trading style
- Be involved in any business which trades in a similar trading style as the company which entered liquidation
The impact of remaining on the register
The sole function of Companies House is to keep a register of all incorporated companies in the UK. It can take action against companies for failure to deliver documents under the Companies Act 2006 (which can include prosecuting its directors) but that is usually as far as it goes. Practically directors are only brought to account by liquidators (and, following the s 117-119 SBEEA 2016, administrators) who need to prove that a director has wrongful and fraudulently trading and not acted in the interests of creditors (s216 IA 1986) (usually demonstrated by cash being withdrawn when it was known that the company was insolvent). This can be a difficult, time consuming and costly process, invariably only resulting in a director not being permitted to be a director in the future. However, as the directors' personal details remain on the Companies House Register to be viewed by anyone who logs on site the belief is that there may well be a stigma in being associated with a company that has gone into liquidation which might affect a directors' future plans and work e.g. it will be all the more difficult to get a loan for the starting up of a new business.
Not all directors' details are shown on the public record e.g. (again following representations), a director’s full date of birth is no longer given, the reason being that the government viewed this as being a key piece of information that could potentially be used in identity fraud. A director’s usual residential address must be provided to Companies House but it will only be placed on public record if the address is used as a registered office or the director’s service address, otherwise this information will only appear on a restricted private register held at Companies House and only made available to credit reference agencies and specified public authorities.
However, if someone really wants to find out whether a person is still alive and living at a particular address the internet is only a click away, their basic personal financial records are available via one of the Credit Reference Agencies (e.g. Veriphy) for £5 but it is the association with a liquidated or 'struck off' company that is the central concern.
Who is for and who is against the removal?
The Times comments that the names of the former bankrupt Dominic Chappell's past dissolved companies would have been wiped off the register under the new rule “making enquiries into his past dealings more difficult”. As such the Serious Fraud Office and National Crime Agency are thought to be against the move (although no formal comments have been issued).
This move to 'wipe' off some companies does not appear to tie in with the future plans of Companies House stated only a few days ago in a blog written by the new director of strategy and communications the intention being to “link better with other parts of government, and (consider how) the company register can support corporate transparency. It might see the register expanding to include a wider range of company information”.
- 20 years is too long a time to be associated with a company from what could be termed as being from another era. 20 years could possibly encompass the whole of a directors' working life. There again, six years is too short a time span as there would be no way of knowing whether that director set up a company, liquidated it and then started again so debts are more likely to be written off/unpaid
- Whatever Companies House says public record of a directors' personal details – address, month and year of birth- are too intrusive
- As there is already a 'restricted private register' why not use that register to more effect? Yes, keep all the information required as per the new confirmation statement for 20 years to be available to such bodies as the SFO but not show on the public register for all to see or show for only six years
- Interested government bodies must surely be able to obtain the details they require from other government sources e.g. HMRC
- There could be a case for reduced detail to be placed on the public register – e.g. show the name, the fact that the company has gone into liquidation/being struck off, the last registered address but not show the name or address etc of the directors involved. If someone really wanted to investigate further there are other sources of information available
- There are no plans for a consultation on this important move – this needs to be addressed