The Challenge of Removing Red Tape

The Small Business, Enterprise and Employment Bill currently going through Parliament contains a number of provisions which are intended to simplify the statutory filing requirements for companies at Companies House.  These result from a Government consultation as part of the "Red Tape Challenge".  But do they really remove red tape for small businesses?

You would think that to remove red tape the Bill would simply delete burdensome provisions from the statute book.  The Companies Act 2006 was the longest Act of Parliament enacted, so it could do with some pruning.  But that's not how Governments go about these things.  What they do is "reform" the law by detailed amendments, intended to make it simpler.

For example, to strike an unwanted company off the register the procedure used to be simple.  I wrote a nice letter to the Registrar of Companies saying I acted for the company, my clients didn't need it any more and would he please strike it off.  He published the usual notices to the company, the Directors and to creditors in the London Gazette, and in 3 to 6 months it was struck off.  The Deregulation and Contracting Out Act 1994 "simplified" this by a new statutory procedure involving a list of preconditions to the effect the company couldn't have done anything for 3 months, a form that has to be signed by all the directors and a £10 fee.  Maybe the new procedure was more accessible, but it was hardly removing red tape.

So what does the latest bill do to remove red tape re company filing requirements?

Clause 92 will replace the annual return with a duty to deliver a "confirmation statement".  The duty is essentially to check the company's particulars registered at Companies House, notify any changes and confirm the particulars once a year.  But this is essentially what you do already if you've signed the company up for Web Filing with Companies House.  I assume you'll still have to pay a fee (which is only £13 if you use Web Filing, as opposed to £40 for filing a paper annual return).  This looks more like a rebranding exercise than a removal of red tape.  Maybe Companies House will streamline their Web Filing screens to reflect the new process, but they could have done that already so long as it still output a pdf annual return form for the public record (which those of us making company searches find quite useful).

Clause 94 is more radical.  This gives companies the option to keep certain of their statutory registers at Companies House rather than in their own paper or electronic registers.  As a lot of small companies fail to keep statutory registers and in practice the only records of shareholders and directors are the filings at Companies House, this makes a lot of sense and should remove duplication of records.  However, the Bill doesn't just say if you don't keep your own company books, the records at Companies House will apply instead.  The company has to elect to keep the registers at Companies House, and for existing companies all shareholders must assent to the election.  Plus you'll need to register additional optional information at Companies House, like shareholder addresses and details of transfers as they happen, which aren't registered at present.  Not all registers are covered either.

There are some sensible changes to existing filing requirements.  The statement of capital on share allotments and annual returns has been simplified so you just need to state the aggregate amounts paid up on each class of shares.  At present you are supposed to itemise it by individual tranches of shares issued at different premiums, which was a problem for companies that have issued shares to successive investors and not kept detailed records.  The requirement for a new director to provide a "consent to act" on his appointment has been replaced by Companies House contacting him and giving him an opportunity to object.  Exact dates of birth will be removed form the public register, which should help combat identity fraud.

Overall these are some useful changes, but there still seems to be a lot of red tape involved in removing red tape.