Fri, 04 Jul 2025 | BUSINESS NEWS
Ministers are set to shelve reforms to Companies House filing requirements for small companies in a bid to reduce red tape for smaller businesses.
The proposed changes, part of the Economic Crime and Corporate Transparency Act, were met with backlash from some founders and investors.
Business buyers on the other hand were eagerly awaiting for the requirements to be enforced, bringing a new dawn of small company transparency.
Proposed Changes
The now-shelved rules, which were scheduled to take effect from April 2027, would have introduced significant changes to the filing obligations for small and micro-entities:
• Profit and Loss Accounts
Small companies and micro-entities would have been required to file their profit and loss accounts, information they were previously exempt from disclosing.
• Director's Report
Small companies would have been mandated to file a director's report.
• Abridged Accounts
The option for companies to file abridged accounts would have been removed.
• Software-only Filing
Annual accounts would have needed to be submitted using pre-approved software, with paper filings no longer accepted.
These changes were intended to increase transparency, combat fraud, and create a more reliable companies register.
BSR Director, Chris St Cartmail, said that the legislation would have been a game-changer for UK business buyers.
“The shelved rule changes would have completely transformed how companies get bought and sold in the UK. Right now, when someone wants to snap up a private firm, they're often flying blind at the pre-diligence stage.
"Think about it this way - imagine buying a house without seeing inside it first. That's what happens when companies try to acquire smaller businesses today. While big public companies have to spill all their secrets in detailed financial reports, private firms can keep their books locked away tighter than Fort Knox."
"The new rules would have blown the lid off this secrecy. Every small company would have had to publish their profit and loss accounts - the real nitty-gritty of whether they're actually making money or just pretending to be successful. No more hiding behind accounting tricks or ‘financial engineering’ and inflated estimates of work they claim they'll finish sometime."
"For potential buyers, this would have been like Christmas morning. Instead of spending months and thousands of pounds trying to figure out what a company is really worth, the crucial information would - at least in some cases - have been sitting there on Companies House for anyone to see.”
“The new transparency rules would have created exactly that kind of confidence in the market. I read one director complaining on X.com that under the proposed new rules, his large customer could easily find out they were contributing 70 per cent of the revenue to his company. And that customer could then leverage their relative importance to obtain big price concessions. "
"But the truth of the matter is that his company is on a highway to nowhere. This is exactly what needs to happen to shake up his business. Nobody would ever buy a company with that much reliance on a single customer."
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