Guest column: Richard Wolff – how changes at Companies House will hide dodgy directors

Richard Wolff, North West chair of the insolvency trade body R3 and head of corporate recovery and insolvency at JMW, says proposed change by Companies House will provide a clean slate for dodgy directors.

AT a time when the public want to see action on corporate irresponsibility and corruption, it seems ludicrous to destroy evidence which could hold the perpetrators to account.

Yet that is exactly what Companies House is suggesting. Its proposal to delete the records of closed companies after just six years instead of 20 years as at present will provide a cover for reckless directors and hinder fraud investigations.

Companies House says the proposal follows complaints from ‘members of the public who believe that retaining, and making publicly available, information relating to long-dissolved companies is inconsistent with data protection law’.

Yet as insolvency professionals, we know that it can take years for fraudulent behaviour to come to light and even longer to trace hidden assets.

It’s not uncommon in insolvency cases to discover that the directors have been involved in several other company failures in the past. The insolvency practitioner’s role includes investigating company directors and returning money to creditors and, while repeated insolvencies do not necessarily signal wrongdoing, it’s useful for them to be able to check a director’s track record.

Fraudsters often dissolve their corporate vehicles in the hope that no one will pursue them and it’s not unusual for action to be taken against a dissolved company many years later, so if one was unable to look back over a long enough period, there’s a real danger that corporate crimes could go undetected and creditor returns lost forever.

It’s not only insolvency professionals who use Companies House records – journalists, police, lawyers, researchers, bank compliance officials all rely on this data, as do businesses themselves for credit reference and due diligence purposes.

From the entrepreneur’s point of view, it’s essential that they know who they’re doing business with, whether as a partner in a new venture they’re setting up or as a supplier who needs to have confidence they’re going to get their invoices paid.

It’s ironic that this proposal comes at a time when Prime Minister Theresa May is promising greater transparency but we can only hope that she will realise the implications.

The histories of dissolved companies need to remain easily available over the long term – the only people who would benefit from removing so much vital information from the public eye would be those with something to hide.