Limited Liability Partnerships (Application and Modification of Company Law) Regulations 2025

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Limited Liability Partnerships (Application and Modification of Company Law) Regulations 2025.

My Lords, in speaking to these amendments I will also speak to the Economic Crime and Corporate Transparency Act 2023 (Consequential, Incidental and Miscellaneous Provisions) Regulations 2025 and the Register of People with Significant Control (Amendment) Regulations 2025.

These instruments form part of the Government’s secondary legislation programme to implement the Economic Crime and Corporate Transparency Act 2023, which I will refer to as the 2023 Act. The 2023 Act delivers the most significant reform to Companies House in over 180 years. It is central to the Government’s efforts to combat economic crime, improve corporate transparency and increase trust in the UK’s business environment. Since the 2023 Act, Companies House has made great progress in implementing the reforms, including removing false and misleading data. For example, from 4 March 2024 to 31 July 2025, Companies House removed something like 113,300 registered office addresses, 88,000 officer addresses and 71,000 PSC addresses.

In April this year, Companies House launched its identity verification service. Hundreds of thousands of individuals have successfully verified their identities. This is a major milestone and ensures that customers and Companies House are ready for mandatory identity verification in November this year, a central pillar of our reforms. These regulations will support the delivery of identity verification, as well as other technical reforms relating to the people with significant control—PSC—framework.

I will briefly speak to each instrument in turn. The Limited Liability Partnerships (Application and Modification of Company Law) Regulations 2025 apply many of the reforms to companies contained in the 2023 Act to limited liability partnerships, also known as LLPs. Specifically, they introduce identity verification for LLP members and PSCs, prohibit disqualified directors from acting as an LLP member, and remove the requirement for LLPs to keep their own “local” registers of members and PSCs. Extending company reforms to LLPs will align requirements across corporate entities. This will reduce opportunities for misuse by criminals and ensure that LLPs, and those doing business with LLPs, benefit from a more transparent and reliable business environment.

The final set of regulations before us today is the Register of People with Significant Control (Amendment) Regulations 2025. These make technical amendments to the PSC regime in the Companies Act 2006 and the Register of People with Significant Control Regulations 2016. This ensures that certain important information relating to PSCs, including “additional matters” that were previously recorded in local registers, is still reported to Companies House. This will maintain the completeness and accuracy of the PSC information on the register.

I should like to point out that the Explanatory Memorandum to this instrument contained a small error when it was initially published alongside the regulations. In paragraph 5.3, it referred to the Limited Liability Partnerships (Application and Modification of Company Law) Regulations 2025 by the wrong title. This has now been corrected.

These regulations are necessary to make the UK a safer and more transparent place to do business and I hope they will be welcomed.

My Lords, I congratulate the Minister on retaining his position after the recent reshuffle of the Cabinet.

Despite recent reforms of Companies House, several issues remain unaddressed and the legislation in front of us does not really deal with them. I will illustrate my concerns with three pieces of empirical evidence. I can do more, but I do not have time.

The first concern is exemplified by a company called Herran Finance plc, which is company number 12370122 at Companies House. It was incorporated on 18 December 2019, with issued share capital, so its accounts claim, of £59,892,205. Its purpose is to provide financial services. This is a dormant company. It has never traded. The rudimentary accounts filed at Companies House show that it had cash in hand and at bank on 31 December of—guess what—£59,892,205. Amazingly, exactly the same amount was held a year later when the accounts for the following year were filed on 12 August 2022.

The company is engaged in banking, though it does not have the word “bank” in its name, which, as we know, is reserved for certain types of organisations. Its name does not appear on the FCA list of authorised firms. None of its directors is on the FCA list of authorised individuals. No person of significant control statement could be found at Companies House. The company’s page at Companies House noted on 10 October 2023:

“Compulsory strike-off action has been suspended”.

There has been no update since then. That is, nearly two years have elapsed.

This is a fake company that may have duped people. It actually has a website and its address is herran.co.uk, which has all the hallmarks of a scam. It describes itself as

“the 10th oldest bank in the country”

and says that deposits with it are safe because they are insured with the Federal Deposit Insurance Corporation —yes, a UK-based bank covered by US depositor protection. If anyone needed a sign of fraud, there it is. The website is an exact clone of a genuine bank.

My Lords, I thank the Minister for introducing these regulations. It is good to hear from him on the progress Companies House is making in cleaning up the register and the process of verification, although, as the noble Lord, Lord Sikka, has just demonstrated so clearly, it is a work in progress.

The Register of People with Significant Control (Amendment) Regulations 2025 are fine so far as they go, but they still leave it far too easy for persons with significant control to disguise themselves and, therefore, not be disclosed on the register as they should be. We discussed this loophole at some length during the passing of what the noble Lord called the 2023 Act. It relates to the use of undisclosed nominee share- holders.

During the process of passing the Act, this House passed an amendment on Report that would have required shareholders holding 5% or more to declare whether they are holding those shares on behalf of another person. That amendment was ultimately dropped during ping-pong after a compromise was reached with the then Government that inserted into the Bill a power for the Secretary of State to regulate to strengthen the rules around nominees’ shareholdings.

A PSC has an obligation to state that they are a PSC, but a dishonest actor would not do so. The problem we have is that the onus on reporting PSCs falls to the company, and the obligations on the company under the statutory guidance are quite weak. The statutory guidance says that the company should simply scan its share register and identify any shareholders who hold 25% or more. It is easy therefore for a PSC who wishes to hide their identity to structure their holdings via a number of shareholdings below that 25% threshold. For example, five holdings at 20% would give 100% control.

All the dishonest actor has to do to hide that control is find five willing people who are prepared to have their name on the shareholder register and hold shares on behalf of the dishonest actor as nominees. There is no comeback for those nominees. They have no obligation to disclose the nominee arrangement unless the company actively asks them to, which it does not have to do if the shareholding is below 25%. So the company could quite legitimately say that it had followed the guidelines and state that it does not have a PSC because it could not see any shareholders above the 25% threshold.

My Lords, I, too, am delighted to be able to welcome the Minister back to his place. I should have done so earlier, in the Chamber, but I am very pleased to see him there. I am grateful to him for introducing these three important instruments and for so clearly setting out the Government’s rationale. For the record, I should probably declare that I have been a member of an LLP, but I am not any more. Together, these instruments continue the implementation of the Economic Crime and Corporate Transparency Act 2023, with the shared objective of enhancing transparency, reducing fraud and strengthening the integrity of the UK’s corporate environment. For the record, I should say that I agree very much with the noble Lord, Lord Vaux. It is very good to hear the progress being made with regard to Companies House. We will come back to that.

I begin with the Limited Liability Partnerships (Application and Modification of Company Law) Regulations 2025, which rightly extend key transparency and verification measures to LLPs. By bringing LLPs more closely in line with traditional company structures, especially in terms of identity verification and reporting requirements, this instrument closes off another avenue through which bad actors could exploit corporate law. The provisions that the Conservative Government made delivered great strides in introducing identity verification for directors and those with significant control in standard companies. Extending those requirements to LLPs is a logical and welcome next step. It is encouraging to see the Government now acting in the same spirit of those reforms.

One area I would like to investigate a little more is to do with clarification, particularly in the definition of what it means to be acting as a member. I am grateful to the law firm, Macfarlanes, which raised this point. It is worth quoting it at some length. It said:

“We can assume this means that the member in question cannot represent the LLP in discussions with third parties or bind it to legal commitments. What is less certain is whether the member can participate in internal management decisions (akin to a director), or even vote on fundamental matters or receive profits (akin to a shareholder)”.

I do not expect the Minister to have the answer to that to hand but I would be more than happy if he were willing to write and provide a clarification, not least because, if the law firms are questioning this, obviously that will hamper the way they are able to advise future start-ups and new LLPs that are forming—of which I hope there will be very many.

Macfarlanes raised another point about the Government’s future plans with regard to LLP members who are not individuals but legal entities. Again, I would be grateful to hear whether the Government have any plans to do anything on that subject any time soon. Once again, I apologise for springing that on the Minister.

I would welcome guidance for LLPs, particularly smaller partnerships, on navigating these new requirements. Although the measures are important, we have to bear in mind that they place additional compliance burdens on already busy enterprises, which is why it is so important that their advisers are as well informed as they can be.

I turn to the register of people regulations. This SI ensures that information relating to an important person with significant control continues to reach Companies House under the new regime. As I said earlier, I am grateful to the noble Lord, Lord Vaux, for asking a number of the questions that I would have asked, so I will not bother to repeat them. The SI streamlines the reporting process by shifting from local registers to a centralised model, and it reduces administrative duplication while improving the accessibility and timeliness of data, which is very welcome. It is clear that transparency of ownership and control is essential to maintaining the UK’s reputation as a safe and trusted place to do business, as the Minister pointed out. We on these Benches believe that the reforms to this regime, first introduced in 2016, are being enhanced and future-proofed by this instrument.