Companies House Scanning - an update pre-empting Dear IP

This is an update to our last article about problems with filing light and double-sided documents at Companies House. We have received some helpful information from around the profession and we had a lovely long response from Companies House, so we think that we can now give you some useful advice on how to avoid problems.

We should start by saying that Companies House have indicated that they will provide their official advice in Dear IP. We have told them that we’d publish this as well, as it is likely to be quicker.

Companies House confirmed that that it “has tightened its procedures recently”. Putting aside our view that this could have been communicated better, the following points first explain the problem, then suggest a practical solution. All this is in the hope that by telling you that there is a problem, you can avoid it in future, saving yourself from regulatory trouble, while also rightly helping to ensure that the integrity of the Register is given priority.

1. Light copies 1 – In the standard PDF Form 600 available on the IPS case management system, there were different fonts in the original print that were being rejected. Turnkey have confirmed that they were aware of the problem some weeks ago and amended the Form in an update. Please ensure that if you use Turnkey’s IPS system, you are using the latest update.
2. Light copies 2 – Documents had been submitted where writing had been inserted using blue ink, or very faint ink, or ink that was significantly lighter than the rest of the print on the form. Companies House instructions do require “black ink or black type”. You should check documents on receipt and, if there is any doubt, get the document completed again so that it is darker. This is only going to happen more often with systems adapting to the New Rules and more documents being completed remotely and communicated electronically. You have to ensure that the version you finally send to Companies House is still clearly legible and consistently dark.
3. Errors – We all make errors, but given the potential significance of a document not being “delivered” to Companies House, you have to take extra care. If you think that Companies House are being unreasonable in requiring you to get every detail correct, see our earlier Blog article here about what happened when they made a tiny error. They will be very precise and they are right to protect the integrity of the register. Knowing that, therefore, you should take extra steps to check documents before they are sent. Consider whether every relevant box has been completed, that any dates are correct and complete, and that any signatures are in the right place. You will still make the occasional error, but it is in your best interest to minimise that risk.
4. Double-sided documents – Companies House have said that although they do accept double-sided documents, it causes them extra work if the document starts on the back of something else, such as a covering letter. Companies House has said that they were not rejecting documents that were incorrect, but that if they rejected a document for some other reason, they would also mention the double-sided problem, to educate the user for future filings. The Register can only have the filed document on it, so please ensure that, if you send a covering letter, it is separate, so that the Form stands alone and can be scanned from the first page to the last without extra, irrelevant, pages that don’t have to be filed. 

We have to finish, I am afraid, with a warning. Despite the potential consequences of a document not being “delivered” on time, Companies House have made it clear that they cannot allow a period of grace. The new procedure will be followed and light or incorrect documents will be rejected. We have asked them to get together with the Insolvency Service and see if there is scope for a more satisfactory long-term solution. We said, “while we understand that you cannot provide a grace period for filing within the current framework, we would argue that between Companies House and the Insolvency Service there should be scope to amend the legislation so that, in future, the decision to reject documents purely on the grounds of scanning difficulties will not have such an extreme impact. One simple solution, although it would, no doubt, have further unintended consequences that would affect your operations, would be for a document to be deemed “delivered” under the insolvency legislation without reference to your Companies Act defined “receipt”. That would allow a light form to be delivered and meet the statutory time limits, while still allowing you to delay filing without such a significant impact on the insolvency proceedings.”. We have not asked Companies House to respond direct to us and we will leave it to them and the Insolvency Service to take action or issue guidance as they see fit.

Companies House – Urgent action required

You’ve seen us rant and rave in the past on a number of topics, but when something serious comes up we try to cut through the bluster and keep the message simple. This is one of those occasions. Urgent action is needed to address the current scanning approach at Companies House before they cause serious problems with the validity of an insolvency appointment.

Since the start of this year we have heard two clients say that documents had been returned by Companies House because the ink used to complete entries was too light, and in at least one case that was because the print and font in a standard Turnkey IPS document was lighter than the rest of the print. They have also had documents returned because they had been printed on both sides of the paper. We have gone public because we see this as a significant threat, but we would be glad to hear from you if you have received similar treatment, so that we can confirm that these were not just isolated examples.

Why are we making such a big deal out of this? We produced an earlier Blog here about delivery to Companies House, but, in short, a document is not “delivered” to Companies House until they have received it, correct and complete, in a format that they are prepared to file on the Register. So, if they turn a document away because their scanner cannot read it, or it has been printed double-sided, then it is not yet “delivered”. Imagine what would happen if the document is a notice converting an Administration to a Creditors’ Voluntary Liquidation. That has to be “delivered” before the anniversary of the administration, or the administration expires. It would be harsh if that happened because the IP had made a minor error on the form to cause the return, but in a situation where Companies House are having scanning problems, that would be totally unfair. Perhaps the courts would rule that there should be some sort of automatic extension of the administration in such circumstances, but who is going to pay the cost of such an application?

Most of this is simply unnecessary and could have been dealt with by some clear communication before it became an issue. If Companies House have got new scanners, or have set new minimum standards for the density of print in documents, surely they should have told the profession and the software providers, allowing time for systems to be adapted to produce the required darker print. Similarly, by making it clear to IPs that documents would need to be darker, say using black ink only, and that only single sided printing was allowed, that would have given them time to adapt and cascade the message to staff, directors of insolvent companies (so that they use a black pen to complete SAs and notices), etc. It does make us wonder, however, why someone thought it was a good idea, in these days of carbon savings and environmental assessments, that an outfit like Companies House, that must deal with billions of sheets of paper each year, should use scanners that can only handle single-sided documents!

That got dangerously close to being a rant again, so we’ll conclude by repeating the message. Urgent action is needed by Companies House and the Insolvency Service to ensure that the new print quality and other conditions are clearly communicated to IPs and the software providers and that some form of concessionary period is introduced, at least as an interim measure, to ensure that documents that have been delivered correct in all legal particulars, but in a lighter print than the scanners can handle, or double sided, are treated as “delivered” and valid under the legislation, despite having to be resubmitted to Companies House. Longer term, Companies House should surely consider obtaining scanners that can adapt to lighter print and handle double sided documents.

Statutory interest in MVLs – the continuing saga!

While HMRC continue to insist on being paid statutory interest on pre-appointment CT, even if it is paid prior to the normal due date, the situation has recently taken a farcical turn.

A client has informed us that they duly paid the pre-appointment CT and statutory interest to the HMRC office responsible for dealing with the company’s CT, only to receive back a cheque for the statutory interest.

The IP then received a letter from the MVL team in Edinburgh indicating that they would not provide clearance until the IP had paid the outstanding statutory interest!

The IP managed to speak to the MVL team and they were advised that the offices responsible for CT in HMRC do not understand and are unable to deal with statutory interest. Instead, the statutory interest must be sent separately to the MVL team.

This is only one example and we have not seen any formal advice from HMRC on the topic, but since the MVL team will no doubt want statutory interest to the date of payment, even if payment was delayed as a result of another department within HMRC not being able to process the payment, you may have to make any payment for statutory interest direct to the MVL team in Edinburgh and not include it in the normal CT payment.

A lack of joined up thinking between Government Departments

Our first Blog of 2018, and while the technical issues involved are not the most important that we have ever raised, the two principles concerned are: namely, a lack of joined up thinking between the Insolvency Service and Companies House, and the view of Companies House that tick box compliance is more important than that the integrity of a statutory register! Hopefully it is not a sign of things to come this year. 

At the tail end of last year we had a couple of queries from clients about the resignation of an IP who was leaving a practice and their replacement by decision procedures in CVAs and Compulsory Liquidations.  The process of achieving that was straight forward, being covered by the terms of the arrangement and the rules respectively, but then the problems started as Companies House would not register the resignation of the outgoing IP.  Where the change in officeholder takes place by way of a Block Transfer Order then it is simply a matter of sending a separate copy of the Court Order to Companies House for each case (nothing like the Government being green and saving paper!) and they will amend the Register, but there are no provisions in the rules requiring the notice of resignation of the outgoing IP to be filed at Companies House.  Companies House have informed us that since there is no statutory requirement to file the notice of resignation, they are unable to accept a notice of resignation for filing, even if that then means that the Register is inaccurate.  While they are responsible for the statutory Forms for filing documents at Companies House, they cannot create a Form if there is no legislative requirement to file a document, and it is The Insolvency Service who are responsible for the insolvency rules.  In contrast, there are Forms for the resignation of the IP in Administrations, MVLs and CVLs as there are rules specifically requiring the outgoing officeholder to notify Companies House.

I know that developing the New Rules was a huge exercise, and that there are bound to be gaps.  I would have thought though that the integrity of the Register would have driven any discussions between Companies House and The Insolvency Service during that process, and that they would have considered all documents that needed to be filed during insolvency procedures to ensure that integrity, including the resignation of an IP as officeholder in all the different corporate case types, not just Administrations, MVLs and CVLs.  It appears though that this particular issue fell through the gap between the responsibilities of The Insolvency Service for the legislation and Companies House for the Forms.  So, over to you, The Insolvency Service, to amend the rules to require the outgoing officeholder to give notice of their resignation to Companies House.  In reality though, that is going to take some time as it is clearly not at the top of any particular political agenda.  Personally though, I think that the having an accurate register is the most important factor in all this, and hopefully The Insolvency Service and Companies House can come up with a non-statutory solution that applies some common-sense to the process and allows the filing of non-statutory Forms where necessary to achieve that integrity.