Corporate Compliance Scoring Framework: Proposal open to public consultation.

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Corporate Compliance Scoring Framework

This framework is designed to assess the compliance of individual officers and corporate entities with company law, focusing on identity integrity, corporate governance, transparency, and legal compliance. The framework is divided into two sections: one for individual officers and another for corporate entities. Each assessed party begins with a compliance score of 100%, with deductions applied based on identified breaches.

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Section 1: Officer Compliance Scoring

This section evaluates individual officers (including real persons and corporate entities) based on identity-related breaches, governance failures, and undeclared interests.

Initial Score:

• Starting Score for Each Officer: 100% Compliance

Breaches and Corresponding Deductions

1. Identity-Related Breaches

   • Officers with Multiple Registered Identities:

     • First Additional Identity: -30%

     • Each Subsequent Identity: -20% per identity

   • Relevant Legislation: Section 1082 of the Companies Act 2006 – This requires that all directors must register their details accurately and consistently. Multiple identities can indicate a breach of this requirement.

   • Rationale: Multiple identities may indicate fraudulent intent or negligence, significantly reducing transparency.

2. Governance Breaches

   • Officers Linked to Dissolved Companies with Overdue Accounts:

     • Deduction: -30% per instance

   • Relevant Legislation: Section 441 of the Companies Act 2006 – Companies are required to file accounts on time. Failure to do so, especially in dissolved companies, breaches this requirement.

   • Rationale: Overdue accounts in dissolved companies indicate poor financial management and lack of accountability.

3. Undeclared Interests

   • Failing to Declare an Interest:

     • Deduction: -20% per undeclared interest

   • Relevant Legislation: Section 177 of the Companies Act 2006 – Directors must declare any interest in proposed transactions or arrangements.

   • Rationale: Undeclared interests create conflicts of interest, compromising corporate integrity.

Example:

• Officer: Director 1

• Multiple Identities: 4 identities (-90%)

• Linked to Dissolved Company with Overdue Accounts: 1 instance (-30%)

• Undeclared Interests: 2 instances (-40%)

• Final Officer Compliance Score: 100% - 90% - 30% - 40% = -60% (Adjusted to 0%, indicating severe non-compliance)

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Section 2: Company Compliance Scoring

This section evaluates the compliance of a company based on the review of its accounts, website, naming practices, and transparency in legal and promotional materials.

Initial Score:

• Starting Score for Each Company: 100% Compliance

Breaches and Corresponding Deductions

1. Corporate Governance Breaches

   • Accounts Not Signed:

     • Deduction: -30% per unsigned set of accounts

   • Relevant Legislation: Section 414 of the Companies Act 2006 – Directors are required to approve and sign company accounts.

   • Failing to List All Active Officers in the Accounts:

     • Deduction: -15% per missing officer

   • Relevant Legislation: Section 853A of the Companies Act 2006 – Companies are required to list all directors and secretaries in their confirmation statement.

   • Corporate Entities Acting as Secretary (Not Disclosed in Accounts):

     • Deduction: -25% per undisclosed secretary

   • Relevant Legislation: Section 275 of the Companies Act 2006 – Companies must disclose the identity of their secretaries in their annual returns.

   • Rationale: These breaches undermine the authenticity of financial statements, reduce accountability, and diminish transparency.

2. Transparency and Legal Compliance Breaches

   • Failing to List Directors on the Company Website:

     • Deduction: -10% per missing director

   • Relevant Legislation: Section 82 of the Companies Act 2006 – Public companies are required to display the names of their directors on their websites.

   • Not Providing Legal Details About the Company on the Website:

     • Deduction: -10% per missing detail

   • Relevant Legislation: Section 82 of the Companies Act 2006 and related government guidance on company signage and materials – Companies must provide specific information on their websites, including registered office address, registration number, and the jurisdiction of registration.

   • Missing Required Information on Business Letters, Order Forms, and Promotional Material:

     • Deduction: -10% per missing item (e.g., registered number, registered office address, jurisdiction of registration, indication of limited status)

   • Relevant Legislation: Companies Act 2006, in line with government guidance on company stationery and promotional materials.

   • Rationale: Missing or incorrect information on the company website and official documents impairs verification and transparency.

3. Similar Company Names

   • Multiple Companies with Similar Names:

     • Deduction: 0% if the name is used by a legally disclosed subsidiary within a group structure with clear transparency and purpose.

     • Deduction: -10% per similar name if there is potential for confusion, but the companies are compliant and properly disclosed.

     • Deduction: -25% per similar name if the company is dissolved with overdue accounts, or if there are multiple identities registered.

   • Relevant Legislation: Section 216 of the Insolvency Act 1986 (Use of prohibited names) and Section 67 of the Companies Act 2006 (Registrar's power to require change of name) – Both relate to the misuse of company names that could mislead or confuse stakeholders.

   • Rationale: While common for subsidiaries within a group, similar names can still pose transparency risks, potentially confusing stakeholders.

Example:

• Company: Company A

• Unsigned Accounts: 1 instance (-30%)

• Missing Officers in Accounts: 1 instance (-15%)

• Undisclosed Corporate Secretary: 1 instance (-25%)

• No Directors Listed on Website: 2 directors (-20%)

• Missing Legal Details on Website: 3 details (-30%)

• Similar Name Issue: 1 instance (-25%)

• Final Company Compliance Score: 100% - 30% - 15% - 25% - 20% - 30% - 25% = -45% (Adjusted to 0%, indicating severe non-compliance)

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Note on Partial Scores:

A compliance score can be derived without assessing all aspects of evidence. When partial evidence is used (e.g., if a company’s website or accounts have not been reviewed), the final score will be accompanied by a note explaining the scope of the assessment and identifying which elements were excluded from the review. This ensures transparency about the limitations of the derived score.

Potential for Reassessment: The current score is provisional and could be subject to change if additional evidence becomes available. Stakeholders are encouraged to consider the scope of the assessment when interpreting the score.

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This framework provides a structured and transparent approach to assessing compliance for both individual officers and corporate entities, ensuring accountability and clarity in corporate governance practices.

Prepares with the assistance of ChatGPT.