Millions of Directors Face Impending Deadline for Crucial ID Checks

Millions of company directors are at risk of fines or prosecution if they fail to complete mandatory anti-fraud identity checks by a looming deadline, with less than half of those required having finished the process. The Companies House verification system, introduced under the Economic Crime and Corporate Transparency Act 2023, has been hampered by delays and technical glitches, leading to widespread frustration and non-compliance.

An Institute of Directors (IoD) survey revealed that a third of its members encountered challenges, citing website crashes and synchronization failures. Last week marked the first prosecutions for non-compliance, a development that follows a year-long delay in the rollout of the rules due to system bugs. The checks apply to approximately 8.5 million company directors, 6.1 million individuals with significant control over businesses, and 170,000 members of limited liability partnerships.

As of the end of June, only 7.3 million of the required identity checks had been completed. Leading economist Prof Doug McWilliams described the system as "clunky" and noted particular difficulty with facial recognition. He recounted spending three days attempting to scan his passport through the One Login system before an attempt at a post office also failed. McWilliams stated that these difficulties led him to step down from his role as a trustee of a community charity, expressing concern for elderly charity trustees and the impact on essential services.

Another company director characterized the One Login system as "flaky at best, full of glitches," adding that it appeared to be "the worst piece of software for the process." The mandatory checks are part of the most significant reform of Companies House since its establishment in 1844, aimed at eliminating fraudulent directorships. In March, reports indicated that third-party agencies were charging up to £840 for assistance with the problematic process.

Ilaria Lavalle Miller from the IoD emphasized the need for a straightforward and accessible verification process, given the large number of individuals required to comply. Directors have been mandated to complete verification before any new filings to Companies House since November. However, all directors must have finalized these checks by November 18 of this year.

The approaching deadline occurs as Companies House temporarily closed its online filing service due to a glitch that inadvertently exposed directors' personal details to the public, raising concerns about potential fraud. Companies House stated that verification "will provide more assurance about who is setting up, running, owning and controlling companies." The agency has recruited 100 additional staff to support the process and is sending written reminders and offering tailored assistance to non-commercial organizations.

Among the first to face prosecution were Jill White and Marc Dillon, both 62, associated with White (Reading Properties), and Modinat Banjo, 50, of J Isogony Apparel. They were fined and ordered to pay costs at City of London Magistrates’ Court. Companies House has indicated it will not release further statistics until the end of the following month.