Companies House has begun to roll out mandatory identity checks for business owners, in a move the UK Government hopes will tighten the net on fraud and encourage fairer corporate environments.

Following the launch of its voluntary identity verification service earlier this year, starting today (18th Nov), the government’s business agency will make ID checks a legal requirement for all directors and people with significant control (PSCs), both new and existing, as well as all members of a limited liability partnership (LLP).

To make the process easier, the government said it is phasing in the requirements over a twelve-month period, and has tried to design the process to be as simple and secure as possible.

Under the new system, introduced under the Economic Crime and Corporate Transparency Act 2023, there are two ways for people to verify their identity: either by going directly to Companies House through GOV.UK One Login for free, or through an Authorised Corporate Service Provider.

According to the government, using the One Login service to perform an ID verification should only take a few minutes using existing forms of ID, such as a passport or driving licence, or by answering security questions.

Once verified, users will receive a unique code from Companies House, which directors and PSCs must provide alongside a statement to confirm their identity for every role they hold.

Statements for existing directors must be submitted alongside the company’s confirmation statement, with the government contacting businesses directly regarding due dates, information which will also be available via Companies House. 

According to the government, by tying every role to a real person, these ID checks will make life a lot harder for ‘bogus’ directors using fake or stolen identities and help prevent criminals from setting up fake companies. 

By linking directorships to verified identities, it’s hoped the reforms will also make it easier to detect disqualified directors and dismantle criminal enterprises built on shell companies.

“Criminals are using fake companies as fronts for serious organised crime and they must be stopped,” said Dan Jarvis, security minister.

“These new measures will ensure fraudulent directors are rooted out and banned, as we continue to pursue those who use dirty money for criminal gain.”

While the government claims that more than 1.5 million individuals have already verified their identity since Companies House launched its voluntary ID service in April, that is a fraction of those who now need to comply.

For example, recent figures show that just 28% of UK directors are prepared for the new rules, and with over 8 million directorships on the register, the government faces a steep challenge in meeting its tight compliance deadline.

Despite the government’s ambition to target dodgy directors and tighten up corporate security, the verification process could hamper legitimate business growth.

According to the Institute of Directors, despite three-quarters of its members being in favour of ID checks, many are worried about the difficulties in using the “confusing, clunky, and occasionally unreliable” One Login system, while SMEs, often described as the backbone of the economy, are worried about the regulatory burden this will cause those with limited resources.

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