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Home » News & Insights » Increased Checks on Formation of new Companies

Increased Checks on Formation of new Companies

Posted on 29th January 2019

It was announced at the beginning of December 2018 that additional ‘application checks’ would come into force with immediate effect at Companies House when requesting a new company formation. The checks are to identify ‘designated persons’ or DPs for short – a term used to identify individuals with financial sanctions imposed upon them by the United Nations (UN). But why now and what does it mean for legal, accounting, financial services or in fact any firm involved in the formation of corporate identities for 3rd parties?

The UN impose financial sanctions on individuals and corporate bodies because of the nature of their activities, such as humanitarian crimes and terrorism. These individuals and corporate bodies are called ‘designated persons’ (DPs) and the sanctions are designed to restrict access to economic resources, thus reducing capacity to fund their operations. The sanctions are included in EU and UK law. The formation of a company could allow a DP to begin trading in some form (even if the suggested activities and SIC codes appear benign) – providing this service to a DP would constitute as making an economic resource available to them.

The checks apply to all personnel registered in relation to a new company formation, be it PSCs, Directors, Members or Secretaries. The following entity types will be affected:

• UK companies (private, public, limited, unlimited, limited by shares, limited by guarantee)
• European companies, known as societas Europaea (SEs)
• Limited liability partnerships
• Scottish limited partnerships

Well, Companies House will now look at the name, address, DOB, nationality and occupation of all personnel associated with a new entity and if the details are a sufficient match for anyone on the DP register, your application will be rejected. You will have the option to resubmit your application, providing supporting evidence if you believe it to be a case of mistaken identity.
In theory then, those involved will only notice the effect when an application is rejected.

So, thorough AML checks and comparing identity information to that listed on the Companies House consolidated list of DPs which you can find here is going to be required.

Therefore, expect extra questions, further examination when forming a new company. This extra bureaucracy and increased workload will mean an increase in the costs associated with the formation of new companies.

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Filed Under: Exclusive News

Disclaimer:- The information contained herein is given by way of general guidance only and no action should be taken solely on the basis of the information contained herein. The Avanti Group (UK) Ltd will be pleased to provide further guidance on the issues, and how they might affect you. No liability is accepted by the firm for any action taken without seeking appropriate professional advice

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