In the coming months you may notice news and advertising more about a requirement for every company director in England and Wales to have their ID verified by Companies House. As theirs are limited companies, directors of Residents Management Companies (RMCs), Right to Manage Companies (RTMs) and leaseholder-owned freehold companies will have to comply.

Verification is quick and easy and there is no immediate rush, however some leaseholders may not have given their status as directors a second thought since they bought and may need guidance. It is already a requirement that every director is registered at Companies House (under the Companies Act 2006), so adding this extra layer of information is quite a streamlined process and takes only a few minutes online.

This mandatory verification process, which applies to both new appointments and existing directors, is scheduled to begin in Autumn 2025. However, you have been able to verify yourself since early April.

Why do directors need to validate IDs?

Identity verification (IDV) is a key part of the enforcement of the Economic Crime and Corporate Transparency Act 2023 (ECCTA), a UK law aimed at tackling economic crime and increasing corporate transparency. It strengthens the “gatekeeper” role of Companies House, enhances law enforcement powers, and introduces new corporate criminal offences, including a failure to prevent fraud and using companies as part of a legitimate front for illegal economic crime activities.

Companies House will require anyone setting up, running, owning or controlling a company, limited liability partnership or limited partnership (entities) in the UK to verify their identity to prove they are who they claim to be – irrespective of their nationality or where they are resident.

Does every leaseholder in the building need to verify?

The rules apply to directors, so if a block isn’t self-managing or leaseholder owned, the answer is no.

Where there is a freehold and/or RTM company you need to check who is and is not a director. While every leaseholder or person with a share in freehold or living in a self-managed block is likely to be a member of a RMC or RTM company, not all are necessarily directors.

Shareholders (members) and directors have two completely different roles in a company. The shareholders own the company by owning its shares and the directors manage it. In general commerce, unless the articles say so (and most do not) a director does not need to be a shareholder, and a shareholder has no automatic right to be a director.

You can check who your directors are for free at Companies House without even needing to have an account or log in.

When do we need to verify director IDs

Voluntary online verification has been available since 8 April, and it will be mandatory for new companies and new directors appointed to existing companies (that will include new leaseholders) from Autumn 2025.

There is a transition period for existing directors of existing companies, with a deadline in Autumn 2026.

How do directors verify ID?

The verification process is easy to do yourself for the computer-savvy, but some directors may need a bit of hand holding. Accountants with authorised status may offer to do it for directors, but that will incur costs which may be unnecessary given how straightforward the process has been made.

The easiest way to verify is via the GOV.UK ID Check app, which is free to download, using documents like a UK photocard driving license or passport.  Mobile phones can read biometric passports UK and non-UK), residence permits and photocard driving licence. This works by taking a photo of the driving licence and then scanning your face to verify your identity

Yes, the GOV.UK ID Check app can read passports, specifically those with a biometric chip. It can also be used with other types of photo ID like UK photocard driving licences, UK biometric residence permits, and other non-UK passports with a biometric chip.

Verification can also be done in person at a Post Office or by answering security questions online

What happens after verification

Directors will be given a Companies House unique identification number (one number will cover all the directorships they hold). For most directors that is all they need to do. However, anyone filing confirmation statements and accounts will need to enter this number in future. Without it, it will not be possible to file.

If you do not comply with identity verification requirements on time, you’ll be committing an offence. Consequences, including a financial penalty.

Until identity is verified, a director should not take any actions on behalf of the company in their capacity as a director. Unverified directors may be disqualified, and the company could be deemed to be committing an offence. For the sake of a few minutes to verify, it’s surely not worth the potential hassle.

A sledgehammer?

This may seem to be a bit over the top for residents’ management and freehold companies but is another example of them being caught in the same net as much bigger commercial enterprises.

Directors of flat freehold and management companies are also subject to company law on liability, meaning they can be personally liable for errors and omissions in building management – even though they are probably acting as volunteers. While the company may have few assets other than its bank balance, the individual directors’ own long-lease flats are assets and make them  ‘worth’ suing personally. That’s why it is increasingly the norm for management companies to take out directors’ and officers’ liability insurance that covers both the company itself and individual directors.

Our Directors’ and Officers’ Liability policy is written specifically for blocks of flats so that the cover, and premiums – are in proportion.  It can be bought alongside our buildings cover or as a stand-alone policy. Do get in touch and we’d be happy to explain the cover.

Disclaimer:

The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.

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