What Is Companies House PROOF?

Companies House is a registry of corporate information. All Limited Companies in England, Wales, Scotland and Northern Ireland are registered at Companies House.

The purpose of companies house is to incorporate and dissolve limited companies as well as examining and storing company information delivered under the Companies Act and related legislation. All this information is available to the public. This is where loopholes for fraud have been able to come about resulting in the need for the PROOF scheme.

The problem is that Companies House is a government department and under the Freedom of Information Act and Data Protection Act 1998 any official or personal information held by public authorities has to be available to the public. This enables promotion of openness in the public sector, giving the general public the opportunity to understand what exactly these authorities do, how they spend tax-payers money and so on.

Unfortunately the catch 22 with Companies house is that while they are providing a valued service as a public authority serving under the Acts outlined above, this system and availability of information is able to be used to commit fraud.

Companies House receives half a million paper documents a month and over 50 of those are fraudulent. However Companies House doesn't check details of paper documents for validity and accepts paper submissions in good faith. Neither does it automatically notify directors nor company secretaries that paper forms have been filed for their company.

Submission of false documents to Companies House, normally involving changing the details of a company's registered office address or the details of its directors/company secretary, has become the standard accepted form of corporate identity theft. This company hi-jacking method led Companies House to put their PROOF scheme in place, which although not perfect, offers some protection from these activities.

87% of SMEs were not aware of Company House loopholes.

In a recent study carried out by Invenio Research Ltd, nearly 9 out of 10 companies were not aware of Company House loopholes that allow somebody to register as a new director or to change a company address details without first notifying the company directors or company secretary.

There were only three sectors that seemed to have some awareness, albeit low, of these loopholes including Legal Services, Catering and Accommodation and Wholesale.

Business in Bristol (19%) and Manchester (18%) claimed to be the most aware.

Companies House does not have the resources to notify extant company directors/secretaries that paper forms have been filed for their company. Moreover Companies House doesn't check the details on the paper forms for validity. As a result, such forms are taken at face value and the register of companies updated accordingly, even if the updated information is false.

The fraudulently updated data becomes part of the public record. Therefore, checks which are made on the company against the register will show that the applying director is registered as an official director of the company and that the address supplied is the registered office of the company. The fraudulent data would appear legitimate in relation to any director/address checks undertaken on the company. Any ordinary credit search against the company would show the actual credit rating of the company.

Provided that the credit rating is healthy, orders made in the name of the company by a seemingly bona fide director would be likely to be dispatched to the false registered office address. The legitimate business may not know that the order had been placed or goods dispatched until the supplier chased for payment. This fraud would impact both the hijacked company (in terms of impact to its credit rating) and the supplier.

Companies House receives around 50,000 paper documents each month and estimates that between 50-100 of these are fraudulent. While this is only up to 0.02% of all documents received, Metropolitan Police estimates that the loss to industry resulting from company hijacking is in excess of £50 million annually.

Only 14% of SMEs have heard and use Companies House PROOF scheme.

A further 12% have heard of PROOF, but still choose to file corporate documents on paper. Almost three in ten companies (27%) haven't heard of PROOF and subsequently default to paper filing. A further 22% haven't heard of PROOF but file their documents online.

Sectors that have heard of PROOF but ignore the security benefits include Accommodation (32%) and Legal Services (25%). Property (e.g. estate agents) Financial Services and IT and Telecommunications are the most likely to have heard of PROOF and use its services.

Regionally businesses in Edinburgh (25%), Norwich (21%) and Manchester (21%) are most likely to have heard of PROOF but choose to file corporate documents on paper.

The Companies House PROOF scheme has been in operation since 2005. Initially companies could only join the scheme by submitting a paper (PR1) form. However with the introduction of the Companies Act, the PROOF scheme now has new terms and conditions which operate under section 1070 of the Companies Act 2006 and which permit Companies House to agree for delivery of documents by 'electronic means'. Companies may now opt-in to PROOF without submitting a paper form.

In order to join PROOF, a company must first be registered for WebFiling. This allows companies to file their annual return online with Companies House for £15. Other information can be filed free of charge including Director, Secretary and Registered office changes as well as abbreviated and dormant company accounts. The services offer pre-populated screens. Information displayed on screen may be amended online and the service has some built-in checks such there is less chance of document rejection. The service also confirms safe receipt of information by Companies House via two e-mails. However, there is still a possibility that this registration process could be open to fraud if the registered office had previously been changed by submission of a paper form prior to the fraudster requesting an electronic security code.

Assuming that a company has successfully and securely joined PROOF, then Companies House will reject attempts to file the following forms on paper and will send the paper forms back to the registered company address:
-annual return
-change of registered office address
-appointment, termination or change of particulars of a company officer
The PROOF scheme therefore covers all the paper forms that have commonly been used by fraudsters to hijack companies.
The original means of registration to PROOF involved a paper-based sign-up which deterred many companies from taking advantage of the protection it offers.