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Companies House has two main functions: the incorporation, dissolution and restoration of limited companies; and the maintenance of a register of company details, annual reports and accounts which it makes available for public inspection. It funds its work by charging fees and pays a small dividend to the Treasury each year.
In the main Companies House appears to be successful. It meets its customer satisfaction targets and covers its running costs. Although the difficulty of forecasting income levels accurately meant it built up reserves, these have been put toward the implementation of the Companies Act.
Companies House handles a vast amount of data. It is now doing much more of this electronically. This move has not been entirely smooth; money has had to be written off on the Companies House Information Processing System (CHIPS) and the commencement of some sections of the Companies Act 2006 has been put back a year to ensure there were no problems with the new computer system. Although this is regrettable, on balance, we think it was right for Companies House and BERR to delay the commencement rather than expose businesses to the risk of a computer system which might not have worked properly.
Companies House has targets to move towards greater electronic filing, which will reduce costs, and could bring security benefits. We regret that these targets have not yet been met and recommend that Companies House press forward on achieving more electronic filing.
The organisation now makes much of its information available on-line (which is also made easier by e-filing). However, as information becomes easier to access, so opportunities for fraud and misuse grow. In our view, the greatest difficulties facing Companies House, and those who use its services, arise from matters which are not directly controlled by Companies House itself—namely the way in which the internet has enabled faster and easier access to information. We make a number of recommendations about assessing particular risks and trying to reduce them. For example, it should be possible for the documentation available online to show whether a particular accountant has been involved in preparing company accounts. Accountants should take responsibility for the accuracy of the figures they file. There is public interest in providing an accessible, efficient, open register of company details, at reasonable cost, which the current system achieves. However, the number of recommendations we make for reviewing the balance between the relative simplicity of the current arrangements and the need to prevent crime suggests the time may have come for a comprehensive review of the system, to identify the extent to which there are cost-effective interventions which could reduce the risk of fraud and misuse.
An underlying theme of this Report is the need for Companies House to do more to explain the limitations of the information it holds. Many users may not realise that Companies House's role is simply to publish information provided by companies themselves and may have unrealistically high expectations of the reliability of information available through a government website. We believe that Companies House could and should do much more to make clear that its role is to receive and publish data and that its power to verify this information is extremely limited. It is understandable—but wrong—that some users of its services assume that, because Companies House is an agency of government, its data can be relied upon to be authoritative—it cannot.
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