Incorrect filing on Companies House can be costly. Here’s what providers need to know

What’s going wrong?

 

While the actual submitting of the forms isn’t difficult, the legwork comes in the preparation. That means ensuring that all accounts are accurate and that there is consistency between your annual filings, your confirmation statement and your company registers.

 

Confirmation statements require you to confirm, every year, that the registered details held about your company – such as the registered address and directors – are correct. Account filings detail the financial activity undertaken by your company.

 

It sounds like it should be straightforward, but there are a lot of different forms.

 

Some of the common errors we see are people misunderstanding what the forms are asking for, how to describe their share rights, and ensuring that the Companies House shareholder register matches their own shareholder registers. It is in fact a criminal act to ‘recklessly’ submit the wrong information.

 

Another common error we see is a failure to understand who the ‘persons of significant control’ (PSC) are.

 

A person of significant control is someone who owns or controls the company. This can include directors, if they are also shareholders in the company.

 

For RPs, this can become quite complicated as they are mutual societies, which can make working out how to complete the PSC register quite difficult. And this is where legal advice on understanding the company structure, what Companies House is looking for and who should be recorded can be invaluable.

 

What do RPs need to know?

 

The picture can be more complicated for RPs due to their structures, where several different share classes are issued.

 

Voting shares, non-voting shares, redeemable shares, preference shares and different denominations, for example, can very easily become mixed up and create a lot of confusion.

 

The frequency with which RPs issue shares, sometimes two or three times a month, also makes them more likely to lose track of how many shares they have and who owns them.

 

Additionally, we see a lot of RPs utilising special purpose vehicles (SPVs) for individual projects.

 

This makes sense to ringfence risk, but is another avenue through which more shares are issued and an opportunity for errors to be made. Reductions of capital to move funds out of companies are also often incorrectly filed.

 

Without very accurate record-keeping, mistakes are easily made. This is where we see auditors going through the records on Companies House, picking up inconsistencies and highlighting where amendments need to be made.

 

While amendments to incorrect filings can be made, not all amends are easy, and incorrect filings on Companies House stay in place alongside amendments.

 

While it is possible to get a court order to erase these, it’s lengthy and expensive, and the court needs to be convinced that there’s a case for it to be removed. Simply making a mistake isn’t a sufficient reason.

 

Also, certain forms are only effective at the time of filing at Companies House, which can have a knock-on effect on subsequent filings, requiring a whole list of filings to be corrected.

What are the consequences?

 

If everything is correctly recorded it should give a clear overview of a company. But incorrect recordings muddy the waters and fail to give a full and clear picture.

 

Under Section 112 of the Companies Act 2006, it is a criminal offence for a person to knowingly or recklessly file a document or statement to Companies House that is misleading, false or deceptive.

 

If Companies House does uncover inconsistencies in your filings, it may issue a formal notice asking for the inconsistencies to be corrected within 14 days. If the company fails to comply, then every company director will be guilty of the above offence.

 

Therefore, it is vitally important that all companies ensure they have stringent record-keeping processes in place for keeping well-maintained statutory registers. These include:

 

• Register of members
• Register of PSCs
• Register of directors
• Register of directors’ usual residential addresses
• Register of secretaries

 

It is also important to ensure that your shareholder register is kept regularly updated to ensure you have accurate records to draw on for filing. The shareholder register is the ultimate arbiter of who actually owns the shares.

 

The accounts team and the governance team need to work together to make sure that the finance records match the shareholder register, and that this information is correctly fed through to Companies House.

 

Company directors must also ensure that not only is the information provided accurate but also that required filings are made within the prescribed timeframe.

 

Not filing your confirmation statements, annual returns or accounts is a criminal offence – and directors or LLP designated members could be personally fined in the criminal courts.

 

Failing to pay your late filing penalty can result in enforcement proceedings. Any criminal proceedings for not filing confirmation statements, annual returns or accounts is separate from (and in addition to) any late filing penalties issued by Companies House against the company.

 

Late filings or failing to file can also trigger the Companies House registrar to take steps to strike off your company. Reasons for a compulsory strike-off include:

 

• Failing to submit your annual confirmation statement (Form CS01)
• Failing to file accounts on time
• Failing to notify Companies House about a change to your official registered office address

 

If your company is struck off, you must apply to the court to be reinstated, which is very expensive. Although you have two years to apply to be reinstated, if you fail to do so in that time all the company’s assets go, which means it all passes to the Crown.

 

However, seeking appropriate legal advice early on in the filing process each year can help to avoid this.

 

You can also contact Companies House directly to ask for their help in understanding their forms. Essentially, you should be aiming for consistency between the various forms you submit and your own internal registers.

 

Helen Curtis, partner, Devonshires