Red Tape Challenge focuses on filings

Red Tape Challenge focuses on filings

Published:

Author: Rachel Reeves

In the latest round of the Government's Red Tape Challenge company filing requirements have been put under the spotlight.

As part of its drive to reduce the administrative burden on businesses, the Government is looking at ways to simplify and streamline information that must be filed at Companies House.

Annual returns

Most EU Member States do not require companies to complete an annual return. EU law requires company information to be updated as events occur, such as on appointment of a new director.

The same is true of the Companies Act 2006 and, in practice, the annual return therefore summarises information which companies should have already updated following an event-driven filing.

However, numerous director appointments or terminations are, in fact, only notified to Companies House as part of the annual return process. As well as being a breach of company law, this reduces the integrity of the register held by Companies House.

Whilst annual returns are useful in providing a snapshot of a company on its annual return date and are a safety net for capturing information companies have previously failed to notify, for those whose details do not change year-on-year, it is considered a burden.

The register is dominated by small and micro-companies, many of which have no more than two directors and five shareholders, and some companies' details do not change throughout their lives. In addition, companies often face having to file their annual return and accounts independently, as well as separate financial information to HMRC.

Proposals

The Government is therefore proposing three options:

  • remove the requirement to complete an annual return, but require each company to confirm, at least annually, that the information held on the register is correct
  • remove the requirement to complete an annual return entirely and rely on event driven filing obligations, subject to requiring statement of capital information at the same time as the filing of accounts
  • retain the annual return, but make it easier for companies to file the return at the same time as they file accounts

It also proposes to make it easier for companies to align their dates for filing accounts with Companies House and HMRC.

Take up of the "joint filing tool" currently available has been low, and the Government intends to improve this facility to make it simpler and easier to use.

Other areas of focus

Other areas of focus for the Red Tape Challenge include:

  • Company registers - for those companies whose directors and shareholders are identical, the Government is considering removal of the requirement for those companies to make their company registers available to the public for inspection. Alternatively, it proposes to allow private companies the option of holding their company registers at Companies House, rather than their registered office or SAIL (single alternative inspection location) address
  • Dates of birth - in order to reduce the risk of them being used in identity theft, the Government is considering removing, either fully or partially, directors' dates of birth from the public record
  • Statements of capital - to achieve consistency in the Companies Act 2006, the Government proposes to simplify the information required in statements of capital that a company is required to file each time its share capital is altered
  • Transparency - as an extension of the Government's initial consultation on transparency of ownership, it proposes to amend the reporting requirements in relation to subsidiaries by requiring a statement of the total number of subsidiaries in a group whenever a company provides information about them and/or requiring that subsidiaries are reported in the accounts
  • Email communications - to help achieve a paperless system, it proposes a requirement for companies to supply an email address and is considering the usefulness of having website address, trading names and contact details on the register
  • Registered office addresses - the Government is considering requiring companies to have a demonstrable connection to their registered office address (eg ownership of the building, consent of the occupier, etc). This would assist in reducing errors, disputes over use of an address and address hijacking
  • Director consent - in order to reduce the number of cases involving director disputes, the Government is proposing to remove the requirement for directors to confirm their consent to act when they are appointed. Instead, the company would be required to keep evidence of consent (usually in the form of a service contract) and, in cases of dispute, the Registrar of Companies would have power to request production of that evidence
  • Accelerated strike-off - the Government proposes that, in certain circumstances (such as where no contact can be made with the company or its directors), the Registrar should have power to initiate a rapid strike off, reducing the time for the strike-off process from six months to six weeks

Next steps

The consultation is open until 22 November 2013, and the Government expects to issue its response within three months.

To read the consultation, please see: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/246020/URN_13-1219_Company_Filing_Requirements_Consultation_October_2013_1_.pdf