Forewarned is forearmed: thoughts on the impact of an IT systems outage on security registrations at Companies House

Key points

• There are obvious benefits to having a digitised register of companies and electronic filing, but it is worth being prepared to submit charge registrations using an alternative method, just in case.

• With a majority of mortgage filings being made to Companies House electronically, any IT outage is going to have an effect and the inflexibility of the 21-day

  registration period for charge registrations against UK companies and LLPs means that those with an interest in a charge may need to adapt their registration method in short order.

• There are some practical issues to bear in mind should an IT systems outage affect the Companies House charge registration system. In this article, the authors consider some of the possible ramifications of such an IT systems failure and how parties with an interest in a charge might work around them.

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The registration of charges granted by UK companies and LLPs at Companies House is a crucial step in securing their validity and the priority of security interests over the assets of a chargor. However, the strict 21-day filing deadline under the Companies Act 2006 leaves little room for error or delay, including in the event of an IT systems outage affecting the electronic filing services provided by Companies House or third-party portals. 

In this article, the authors examine some of the recent incidents that have highlighted the potential vulnerabilities of electronic filing and offer some practical tips and considerations for parties with an interest in a charge in the event there is an IT outage during the period allowed for the registration of a charge.

Background

In the digital age, our reliance on IT systems for the smooth operation of legal and financial processes (and many others besides) is undeniable. In the UK, Companies House plays a pivotal role in managing the public register of companies, including maintaining the register of charges for companies and limited liability partnerships (LLPs). The strict 21-day filing deadline for the registration of charges granted by UK companies and LLPs at Companies House under s 859A of the Companies Act 2006 (CA 2006) means it is an area where the impact of an outage of Companies House systems (or a more general IT outage) would be felt that much more acutely and urgently. Whilst acknowledging the many benefits of digitisation at Companies House, recent events have highlighted some of the potential vulnerabilities in our reliance on such systems.

Recent Incidents

IT-related incidents are an unfortunately regular occurrence these days, but some have been serious enough to gain national and even global attention, and they have underscored possible vulnerabilities in Companies House’s (and others’) systems.

• CrowdStrike: The global IT disruption caused by the CrowdStrike update, although not apparently directly affecting Companies House, demonstrated our widespread dependence on IT systems: how a faulty piece of code could ground flights, disrupt health services and crash payment systems globally, amongst other things.
• WebFiling outage: Closer to home, an outage at Companies House in early June of this year disrupted their WebFiling service, which many companies use when filing documents, including annual accounts, confirmation statements, submitting charge registration and release documentation. This outage had a knock-on effect on other third-party portals that plug into Companies House’s IT system for the delivery of company information and forms required by legislation to be delivered to the Registrar of Companies.
• Rogue MR04 filings: An earlier issue with Companies House filings made the news in February and March of this year when an individual filed over 800 MR04 release forms electronically, wrongly suggesting that those charges had been released. Companies House were able to use their new powers under the Economic Crime and Corporate Transparency Act 2023 (ECCTA) (which fortuitously had come into force on 4 March 2024), to correct the register swiftly. Without these powers, rectifying the issue would likely have required court intervention, causing significant delays and complications.

The 21-day limit

Although there is no longer a criminal sanction for failure to register a charge under s 859A CA 2006, there are compelling reasons for chargors and chargees to register charges granted by UK companies and LLPs at Companies House.

CA 2006, the money secured by it becomes immediately payable. The inflexibility of this registration period means that, should there be an outage of the IT systems at Companies House, anyone needing to register a charge may need to adapt their registration method on very little notice.

Outages to be expected, but be prepared

According to Companies House’s own statistics,¹ 93% of filings related to mortgage documents were made electronically in 2023-24 (this will include filings related to the release of security, as well as registrations). This has risen from 44.2% of such filings in 2014-15. With a substantial number of filings now being made to Companies House electronically, it is to be expected that outages will have an increasingly significant effect. The degree of seriousness of this downtime can vary and the system used by the party submitting forms for filing at Companies House will also have a bearing.

The three key issues would be:

1. if Companies House’s WebFiling service (their online filing service) is unavailable in its entirety;
2. a failure of a third-party provider. Not everyone will submit forms to Companies House using the WebFiling system. There are various third-party providers that offer filing services which feed into the Companies House system. If the third-party system goes down, it will disrupt that party’s submission of charge registration forms; or
3. a total system failure at Companies House, rendering all electronic services unavailable.

Possible alternatives

In the situations mentioned above (and in the same order):

1. If the WebFiling service is not available, third-party providers may still be up and running. If not, users might have to revert to paper-based submissions.
2. Depending on the seriousness (and the time it may take to resolve), an alternative method of filing to the third-party portal (including WebFiling or paper-based submissions) might need to be used.
3. If Companies House’s internal systems are affected by a total system failure, this could make the processing of paper forms difficult or impossible, too. It is in this scenario that it would be hoped that Companies House would be most likely to use its discretionary powers (see below). Ultimately, the courts’ discretionary powers to remedy the register would be available (although probably as a last resort).

Alternative providers and back to paper

For those using third-party providers to submit charge registration or release forms, it is worth having thought about the possibility (and practicalities) of needing to switch to using the WebFiling service in the event that the third-party portal is down for any significant length of time, or if you do not have much of the 21-day filing window left when the system fails. This preparation would include having your Companies House authentication codes to hand to use in the WebFiling system.

If electronic filing is not an option because the Companies House system is unavailable as a whole, reverting to paper-based submissions might be the only viable alternative. However, this method comes with its own set of challenges. Paper forms take longer for Companies House to process, increasing the risk of missing the 21-day deadline. Additionally, because the person submitting the form has to wait for it to be returned should it be rejected (and then resubmit), there is less time to correct any mistakes, further elevating the risk.

Companies House and the Courts' discretionary powers

The incident involving the wrongful filing of forms MR04 provided an example of Companies House using their new discretionary powers under the ECCTA to address an overarching issue that was not the fault of any party with an interest in the charges involved.

Whilst this demonstrates Companies House’s ability (and, more importantly, willingness) to address certain issues proactively where there is a clear-cut issue, it also underscores the importance of having robust systems and contingency plans in place. Furthermore, these discretionary powers under the ECCTA are intended to be used in specific circumstances and so those with an interest in a charge should not rely on Companies House choosing to exercise them to resolve an issue that they could have avoided by using an alternative filing method.

If a registrable charge is not registered at Companies House within the 21-day time limit or if some sort of rectification is needed, the lender may apply to court under s 859F CA 2006 for an extension of the period allowed for delivery of the particulars of a charge or rectification of that registration. However, this remedy is subject to the court being satisfied that, amongst other things, the failure to deliver was accidental, is not likely to prejudice creditors or shareholders of the company and that it is just and equitable to grant that relief. So, this procedure acts as a final backstop in the event of a failure to register pursuant to s 859A CA 2006 or a mistake being made, but is really not a process that a party would want to have to go through, and there is no guarantee of a satisfactory outcome for the applicant.

Practical Considerations

Form availability

While it should be possible to satisfy the requirements of s 859D CA 2006 by drafting a bespoke document including the information stipulated in that section, it would be quicker and easier to have access to paper copy MR01 forms for charge registration.

Keeping a supply of paper forms on hand might be worthwhile for ease, even if electronic filing is the preferred method except in extreme conditions.

Delivery

If filing paper forms becomes a necessity for a time, those filing would need to know how to deliver them. With the closure of many of Companies House’s in-person desk services, it appears that physical delivery of forms can only be made to their external post box in Cardiff, although proof of delivery will not be provided if this delivery method is used. The usual way of delivering paper forms is now by post (or courier) to Companies House in Cardiff. Companies House guidance makes it clear that postal and other delivery services may be subject to loss or delay, that a guaranteed delivery service is advisable when posting close to a deadline and that delays in transit will not be accepted as a reason for late delivery. So, whichever delivery method is used, anyone registering a charge at Companies House should be proactive in their delivery and monitoring of the status of its registration.

Internal policies

It is advisable for parties who file charge registration documentation at Companies House to ensure that their internal policies (relating to filing and internal form verification) are flexible enough to handle alternative methods of filing. This might include having contingency plans for switching to alternative filing methods and having the ability to disseminate information quickly once an issue comes to light.

Summary

The impact of an outage at Companies House on the registration of charges could be significant given the statutory 21-day deadline. It is always best to be proactive when registering security and, although hopefully unlikely to happen, anyone who is involved in filing charges at Companies House should at least have considered what might be needed to make a filing in a different way to normal. In doing so, it should minimise the impact of an outage at Companies House and ensure the timely registration of charges, safeguarding clients’ interests and maintaining compliance with statutory requirements.