The UK’s corporate register is expected to shrink over the next year as new identity verification rules for company directors and beneficial owners come into force on Tuesday, experts in corporate transparency and financial crime say.
From 18 November, all new directors and persons with significant control (PSCs) must verify their identity with Companies House before they can form or run a company. Existing directors and PSCs will be phased into the system over the next 12 months, completing verification when they next file a confirmation statement. Acting as a director without verification will become a criminal offence.
Companies House said the reforms aim to combat fraud, money laundering, and the misuse of shell companies by ensuring that those running and controlling companies are who they claim to be. More than one million people have already verified their identities, and up to seven million more are expected to complete the process over the next year.
Experts predict the new rules will have an immediate impact on the number of new company incorporations and the overall size of the UK corporate register. Graham Barrow, a corporate filings and financial crime specialist, said incorporation levels are likely to “fall off a cliff” as individuals unwilling to disclose their identities drop out of the system.
“There will be a whole bunch of people who have no intention of going through the process,” Barrow said. “We are likely to see a significant slimming-down of the register over the next year.” He emphasized that a smaller register does not indicate weaker economic activity, noting that many of the companies affected are linked to individuals with dubious intentions.
As of September, the UK corporate register included 5.5 million companies, more than 500,000 of which were already undergoing dissolution or liquidation. Registered agents, such as solicitors, accountants, and formation agents, will be able to verify identities on behalf of clients.
However, Barrow warned that the reforms could prompt attempts to evade the rules, including the use of “ghost directors,” individuals paid to lend their identity to conceal the real operators of a business. Payments of around £500 per identity are not uncommon, he said. A Times investigation last year revealed directors being paid to act as fronts for failing companies, allowing true owners to avoid scrutiny; three individuals involved have since been banned from running companies.
In addition to identity verification, companies will now face a new legal duty to investigate their PSCs. Hamish Perry, partner at Charles Russell Speechlys, said businesses must proactively identify who holds significant control, serve formal notices where necessary, and report suspected PSCs to Companies House, even if confirmation is not obtained.
Perry described the reforms as a “significant raising of the bar” for corporate transparency, particularly for businesses with complex ownership structures. The changes coincide with the abolition of statutory registers and stricter filing requirements, placing companies under closer regulatory scrutiny.
