MORE STRINGENT CHECKS ON DIRECTORS?
33. As noted above, Companies House does not verify
the details sent to it. The Finance and Leasing Association wanted
a more thorough vetting process for the registration of company
directors:
The verification of the identity and background
of company directors is essential when a finance company decides
whether to provide a lending facility. It also forms part of the
prudent risk assessment which underpins responsible lending decisions.
But Companies House's failure to vet the details of company directors
listed on their website means that the Directors Register is currently
unreliable.[63]
The British Bankers Association suggested that directors
names should be verified by Companies House against "voter
roles, mortality files, VAT records" to prevent "front
companies" being set up. They are concerned that false names,
corruption of names and unwitting or collusive distant family
members are held up as directors of so called "front companies"
which are used to hide assets from creditors.[64]
We understand why it would be desirable to have more thorough
vetting of directors and we note the British Bankers' Association's
suggestion that directors' details should be checked by Companies
House against other government held data. However, the principles
of data protection need to be abided by and the practicalities
of such scrutiny considered. Moreover, we recognise that Companies
House's primary function is to maintain its register and make
it available to the public and this would be a move away from
its statutory role. Given the volume of information handled such
vetting could have considerable costs. There is also a danger
if only partial checks were made, users of the data could be given
false confidence in its reliability, rather than knowing, as now,
that Companies House simply acted as publisher. Nonetheless, we
recommend that a cost-benefit analysis is conducted of available
ways to increase the level of checks on directors and, in particular,
to make it harder for disqualified directors to evade detection
by small changes in their details.
Company accounts
34. Through Companies House it is possible to see
from paper files if an account was prepared by a qualified accountant
and the name of that accountant; this is not possible with electronic
files. The Professional Oversight Board, which oversees the regulation
of accountants and actuaries by their respective professional
bodies, suggested that this should be introduced for electronic
filing. Accountants could then check electronically that their
names were not associated with accounts they had not prepared.[65]
The Professional Oversight Board was also concerned about the
variable quality of accounts filed and argued that electronically
filed accounts which indicate the accountant responsible for preparing
them, would increase transparency and therefore indirectly improve
quality.[66]
35. When we asked Companies House why electronic
accounts did not include the reference to the accountant, we were
told the process was kept as simple as possible to encourage initial
take up of on-line filing. However, Companies House also said
that it was:
being actively encouraged by BERR to work towards
providing companies and their advisors with opportunities to include
[
] as wide a range of options as possible for additional
disclosures, in addition to the statutory minimum information.[67]
36. Professional accountancy bodies have been working
with Companies House to develop these arrangements but, according
to the Professional Oversight Board, "progress to date has
been rather limited."[68]
37. We understand why Companies House did not
include information on the preparation of accounts when it first
arranged to publish them online. However there would be real benefits
in giving this information in the future. We cannot believe that
there is any significant technical barrier or extra costs to indicating
the involvement of a professional accountant on electronically
filed accounts. We also support the Professional Oversight Board's
suggestion that accountants should be notified of the filings,
in which they are named, to prevent them being falsely associated.
We urge Companies House and the Professional Oversight Body to
resolve these issues as soon as possible. The accountant identified
as responsible for filing the accounts should then take full responsibility
for the accuracy of the information contained in them. Notwithstanding
our recommendation in paragraph 26, this would enable users of
Companies House data to have much greater confidence in its reliability
without placing any additional burden on the companies whose information
is recorded there, or on Companies House itself.
39 Q 7 Back
40
Q7 Back
41
Q 9 Back
42
Q 10 Back
43
Q 11 Back
44
Qq11 and 12 Back
45
Q 8 Back
46
Q 3 Back
47
Q 14 Back
48
Ev 31 (Companies House) Back
49
Ev 31 (Companies House) Back
50
Q 41 Back
51
Q16 Back
52
The Financial Action Task Force define Politically Exposed Persons
(PEPs) as individuals who are or have been entrusted with prominent
public functions, for example Heads of State or of government,
senior politicians, senior government, judicial or military officials,
senior executives of state owned corporations and important political
party officials. There is a risk that PEPs involved with business
could be corrupt politicians who are money laundering and/or financing
terrorism. Back
53
"World-Check exposes terrorists, financial criminals and
disqualified", World-Check Press release, 21 February 2008
Back
54
Q 62 Back
55
Q 61 Back
56
Ev 33 (Companies House) Back
57
Ev 33 (Companies House) Back
58
Insolvency Practices Council Annual Report 2007 Back
59
Ev 37 (Insolvency Service) Back
60
Ev 37 (Insolvency Service) Back
61
Ev 37 (Insolvency Service) Back
62
Grant Thornton, Review of Investigations and Enforcement: The
Insolvency Service, July 2008 Back
63
Ev 36 (Finance and Leasing Association) Back
64
Ev 24 (British Bankers Association) Back
65
Ev 41 (Professional Oversight Board) Back
66
Ev 41 (Professional Oversight Board) Back
67
Ev 31 (Companies House) Back
68
Ev 41 (Professional Oversight Board) Back