ECSH52175 - Company formation - compliance visit overview
Source: gov.uk (2025-10-28)


A formation agent is a business which forms companies. Formation agents typically operate through online platforms which use software with the capability to submit electronic incorporations directly to Companies House. For many formation agents, the business model is based on low cost and high sales. Some formation agents will form more than 1,000 UK legal entities each month. They can provide bespoke formations to a customer’s requirements, or sell a pre-formed “off the shelf” company.

Currently, only the forming of firms in response to a customer request is relevant activity for the purposes of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). The sale of pre-formed “off the shelf” firms, where the firm was formed without a customer request, is currently not in scope as relevant activity.

In July 2025 HM Treasury confirmed that the next updates to the MLR Statutory Instrument (SI) will draw the sale of pre-formed “off-the-shelf” firms into scope as relevant Trust or Company Service Provider (TCSP) activity. This will require draft legislation to be laid before Parliament before it can be implemented. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Buying a company “off the shelf” means contacting a formation agent to buy a pre-formed company that has already been registered at Companies House. Formation agents offering this service have a stock of such companies available which will be registered at the TCSP address with the directors being the formation agent or members of their staff. These companies are usually registered with neutral names so that they can be used by anybody buying one. It is usual for such companies to be registered with just two £1 shares issued to the directors.

The sale of the ‘shelf’ company takes place by the formation agent submitting online forms to Companies House which notify the resignation of the formation agency staff as directors/shareholders of the company and the appointment of new directors who are the purchasers of the company. Full details of the new directors are supplied together with the new registered office of the shelf company. The shares in the company are transferred to the new owners as part of the price paid. This is done by completing share transfer forms and handing over the share certificates.

Many TCSPs offer added value by bundling the sale of a shelf company or new firm formation in with other one-off services, e.g. articles of association, and referral to banks, accountants, and other service providers for which the TCSP receives commission. Typical services offered by a formation agent include company formation (and could include sale of shelf companies), registered office address, and company secretarial services. TCSPs generally sell “packages” with different levels of service, though a formation agent’s main business is typically formation, with or without a registered office address.

Formation agents typically operate from one location, but some have several and many will deal with customers via online services only. The risks of impersonation fraud associated with non-face to face delivery methods can be mitigated by using electronic verification systems. However, this will not mitigate the risk of a clean skin (i.e., someone without a criminal record and not known to law enforcement) establishing corporate structures for an organised criminal gang (OCG). It is important that the formation agent properly assesses all the risks associated with the customer and transaction, questioning why the customer seeks to establish the corporate vehicle(s) and other services required and whether that seems credible/rational, as well as assessing the money laundering and terrorist/proliferation financing (ML/TF/PF) risk posed and what measures the TCSP needs to put in place to manage those risks.

Most TCSP customers are UK individuals seeking to set up their own business. In addition to direct customers, it is likely that formation agents will have customers who are professional intermediaries. Some TCSPs specialise in providing services to commercial customers including accountants, lawyers, banks etc. This includes specialist formation agents who are contracted by lawyers, accountants and other third parties, to form companies for them, to be sold onwards to their own clients. The ML/TF/PF risks can be increased where these intermediary lawyers, accountants or third parties, are not UK persons.

Formation agents are normally paid by electronic methods, often through a third-party (i.e. WorldPay) which uses 3D secure to prevent fraud. Due to the products and services offered, formation agents do not typically have oversight of a customer’s banking records so would be unable to identify transactional risks within the entities that they establish. However, it is vital the TCSP conducts a thorough risk assessment of the services it is being asked to provide in relation its own financial transaction with its customer.

At a compliance visit, an officer should seek to understand all TCSP services (relevant activity) conducted by the TCSP, how the TCSP has risk assessed each service alone and in combination, and how it manages and mitigates those risks.

Record testing should span all of the TCSP services provided. For example, where a TCSP provides formation and trustee services, records should be selected where formation services have been provided, where trustee services have been provided, and where both services have been provided together.

Where the TCSP also carries out relevant activity in another supervised sector, an officer should seek to understand the business’s compliance with the MLR 2017 in respect of that additional sector(s). Record testing should span all sectors of relevant services provided by the business, including where provided in combination.

General money laundering, terrorist financing and proliferation financing risks for TCSPs can be found at ECSH52125. (https://www.gov.uk/hmrc-internal-manuals/economic-crime-supervision-handbook/ecsh52125)

At a compliance visit, TCSPs should be expected to provide an explanation for any departure from published guidance.