Is your business prepared for identity verification (IDV)?

Changes to UK company law mean that certain individuals (including company directors) will soon be required to verify their identity with Companies House (CH).  Is your business prepared for these changes?  If in doubt, read on…

Why the change?

This change (introduced by the Economic Crime and Corporate Transparency Act 2023) forms part of a wider government drive to: (a) combat economic crime (including fraud); (b) improve trust; and (c) ensure the accuracy of information at CH.

Who will be subject to IDV?

IDV will apply to (among others in due course):

• Directors
• People with significant control, definition below (PSCs)
• Members of Limited Liability Partnerships (LLPs)
• Individuals filing documents on behalf of others at CH (e.g. a company secretary)

(Typically, a PSC is a shareholder who (a) holds more than 25% of the shares or more than 25% of the voting rights in a company; or (b) has the right to appoint or remove the majority of the board of directors of a company.  Where the PSC is a corporate entity (also known as a relevant legal entity), the IDV requirement will apply to a nominated “relevant officer” of such entity.)

When do they need to verify their ID?

Currently, IDV is voluntary for directors, PSCs and members of LLPs.

It will become compulsory for all new directors, PSCs and members of LLPs with effect from Autumn this year (date to be determined).  Directors will need to have their identity verified before their appointment is notified to CH and before they can act as directors.  In a similar vein, applications for the incorporation of new companies will be rejected if the first proposed directors have not had their identities verified.

For existing directors and members of LLPs, a 12-month transitional period (starting in Autumn 2025) will kick-start their IDV process – with the annual confirmation statement of the company/LLP marking the date by which existing directors/LLP members must verify their identities.

The timing considerations for existing PSCs are slightly different and we would be happy to discuss these with you further.  The IDV requirement for individuals filing documents on behalf of others, is expected to come into force in Spring next year.

How IDV is achieved?

Individuals can verify their identity either directly at CH free of charge or indirectly via a third party, known as an authorised corporate service provider (ACSP).  The route chosen will depend on factors including the nature of the individual’s identity document (e.g. is the passport biometric or not?), the issuing country, whether the individual has an address in the UK and whether the individual has been disqualified under directors’ disqualification legislation.       

What are the consequences if a director’s identity is not duly verified?

Whilst the acts of the individual, in holding themselves out as a director, will not be invalidated, the individual and company (and the directors) will be committing an offence punishable by fine.  Individuals also run the risk of being disqualified to act as directors.

What happens post verification?

For most individuals, it is anticipated that IDV will be undertaken once only.  Individuals will receive a unique identifier number, which they should keep secure.  They can use this number to link all their other relevant positions.

Steps for your business to consider:

• Create a list of the individuals within your organisation who will need to IDV (your IDV Individuals). Ensure this list relates to all companies within your group.
• Check when your annual confirmation statement is due post Autumn – this will act as your hard deadline for existing directors/ LLP members.
• Map out how you plan to facilitate verification for each IDV Individual?
• Inform each IDV Individual of the new requirement – if feasible, encourage them to verify their identity now during this voluntary phase.
• Inform other relevant internal teams of this change (e.g. HR and CoSec).
• Create a policy for dealing with new IDV Individuals going forwards.

We are here to help. Please do get in touch with us if you need any assistance with these changes.