The issue of buying a new company anonymously is the latest aspect of UK business registration to be affected by the Companies Act 2006. From 1st October 2006 changes come in to effect which will severely curtail the usefulness of nominee directors.
The new regulations state that when buying a new company and registering it through Companies House, at least one of the directors must be an actual person. Prior to this it was possible to form a company with a sole corporate director.
Thus, if a person wished to buy and own a company and remain anonymous at the same time, they could prior to the new rule use a nominee director who in most cases would be a company.
Most UK company formation agents are unwilling to provide a service which requires a named individual from their business to act as the director of an unknown company.
When using a nominee company, the agents always enjoyed the protection which came from using a designated corporate entity. This, together with the money laundering regulations of 2007 which made the administration of offering nominee services more arduous, will effectively make it very difficult to buy a company without revealing the true identity of the directors and beneficial owners.
Reasons for the Change
Several recent high profile cases of fraud and other wrong-doings have prompted the Government to review the measures which were in place to ensure that customers could find out who they were interacting with and that those responsible for any illegal acts could be identified.
The veil of hiding behind corporate officers when buying a company was commonplace by those wishing to carry out some illicit activity whilst at the same time, have others held responsible once the facts came to light.
Effects on Buying a Company
The effects of the new regulations are widely seen as limiting the capacity for people, both those with genuine motives and those with others to buy a company and appoint third parties as the director and shareholders of the business.
Volunteers could be used in these positions but it is less likely as their personal exposure would be high and therefore they are less likely to agree to a nominee proposal.
One aspect which may be adversely affected by the changes is the ability of a person to buy a company, who has genuine reasons for protecting their identity from doing so.
Examples of such situations might include where an employee wishes to register a company and enter in to the same field as the employer. The use of nominees in this situation was commonplace. For these people alternatives will have to be sought.