Yesterday, 22nd September 2022, the Government published the Economic Crime and Corporate Transparency Bill. If passed, this will overhaul Companies House and the processes of registering companies, LLPs and limited partnerships.
Objectives include tackling, in the Government’s words, “dirty money” flowing through the UK.
The key LLP and partnership proposals include:
- All LLP members will be required to verify their identities at Companies House (as will company directors). This is expected to be a ID and address check (i.e. passport and recent utility bill) through Companies House or a third party provider. There will be a transition period to ensure existing LLP members’ ID is verified.
- All individual members of corporate LLP members will be required to verify their identities, as will persons with significant control (PSCs).
- LLPs and companies which form companies, LLPs and limited partnerships (i.e. most law and accountancy firms) must be supervised by an AML regulator and must register as ‘Authorised Corporate Services Providers’ (ACSPs).
- Limited partnerships must have a UK registered address (which may be different from the principal place of business).
- LLPs which are the general partner of a limited partnership will need to name a ‘managing partner’ who is an individual.
- The Registrar will have stronger powers to query the information held on the Register and exchange information with other bodies.
This Bill represents another transparency initiative, including the Register of Overseas Entities relating to UK real estate launched earlier this year and the extension of the trusts register to a wider range of trusts, including bare trusts. The latter triggered obligations on professional practices, financial services firms and other businesses to register bare trust arrangements (also known as nominee arrangements) which form part of their structures.
Partnerships and LLPs still have time to digest the proposals and their implications, but should start that process sooner rather than later. We are happy to discuss this with you. Firms advising on company, LLP and limited partnership formation – whether as formation agents or advisers providing that service as part of a wider corporate transaction – will need to consider the steps they need to take to ensure they are (and remain) ACSPs. Clients will also be interested in the privacy implications of these proposals for them.
Businesses will also need to start considering how they will verify the identity of their officers and PSCs. For smaller businesses this may be relatively straightforward. For larger for example, large law and accountancy firms, this will be a significant logistical exercise, both to complete the transitional exercise and when new partners are admitted. It is hoped that policy makers have already planned for potential complexities, such as non-UK passports and non-UK proof of address, otherwise this could be problematic for large international firms in particular.
Corinne Staves, partner, commented: “We welcome these transparency initiatives. For many years there have been insufficient checks and controls at Companies House. This has enabled some operators with improper motives to register companies, LLPs and limited partnerships at Companies House, which has in turn tarnished legitimate UK registered businesses. The proposals will however add delay and complexity. Professional advisers need to identify the changes they need to implement, likely to include price increases and longer timetables, to ensure they can still meet clients’ objectives. Firms which set up companies, limited partnerships and LLPs (which will include most law and accountancy firms) will also need to register as ACSPs.”
Andrew Pavlovic, Partner, said “ID verification checks rarely unearth serious issues, such as criminal convictions, and should in theory be quick to complete. However, law firms have recently experienced practical issues with similar checks as part of the SRA authorisation process. That process, where owners and managers must submit DBS checks to the SRA, has highlighted that in practice checks cause significant delay. Occasionally this is due to third party providers, but most often it is the practical challenge of getting partners who are focused on clients’ objectives to complete this as a priority. The Bill’s proposals seem likely to present the same practical challenges”
“The Bill also proposes that the SRA will have the power to issue fines in unlimited amounts to individuals/firms where there have been regulatory breaches in cases involving “economic crime”, which would include facilitating/assisting in anti money laundering fraud and sanctions breaches. The SRA has recently increased its internal fining powers to £25,000 and there may be concern in the legal community that any further expansion in the SRA’s fining powers will limit the jurisdiction and oversight of the Solicitors Disciplinary Tribunal.”
For more information, please contact Corinne Staves or your usual CM Murray LLP contact.
Corinne Staves is recognised by Chambers and Partners UK 2022 as “Band 1” in the field of Partnership (Non Contentious) and has substantial experience in advising on all aspects of partnerships, LLPs, and individual partners.
Andrew Pavlovic is recognised by Legal 500 UK 2021 & 2022 as a “Rising Star” in the field of professional discipline, and has substantial regulatory experience, having previously acted for the Solicitors Regulation Authority over several years in complex disciplinary proceedings and subsequent appeals.