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.