The Economic Crime & Corporate Transparency Act 2023 (ECCTA) received Royal Assent on 26 October 2023 and will trigger the most radical reform to Companies House since it was created in 1884, as well as measures to increase transparency in relation to entities registered in the UK. The first wave of changes is due to be implemented in March 2024. We have produced information on this Act and templates to help companies understand and navigate the changes that will be brought into force throughout 2024 and 2025. You can find our information on the Act here, and our templates can be accessed here.
In this post, we take a look at some of the key changes ushered in by this important new legislation.
Identity Verification
ID verification will be introduced for all new and existing company directors (and their equivalents for other entities), people with significant control (PSCs), and those filing information with Companies House. ID checks will either be through Companies House directly, or made with an authorised corporate service provider. New directors will not be able to act until ID-verified and directors and PSCs who do not verify their ID will commit a criminal offence and/or incur a civil penalty. Companies with unverified directors will also commit an offence.
Transformation of Companies House
Companies House will be transformed from a passive recipient of information to a much more active gatekeeper over company incorporations and a custodian of more reliable data. This means they will have the power to query and reject filings and remove material from the register. Information will also be required to be filed electronically.
Miscellaneous Changes
These include changes to company record keeping requirements, stricter checks on company names, changes to company accounts (particularly for small and micro entities), abolition of corporate directors except in limited circumstances, keeping an appropriate company registered office address, and maintaining an email address.
Expanding the Scope of Corporate Criminal Liability
A new offence of failing to prevent fraud is being introduced, along with provisions that expand the scope of the “identification” doctrine in corporate criminal liability. The offence of failure to prevent fraud only applies to large organisations and therefore will not be relevant to SME companies. However, the expanded scope of the “identification” doctrine within corporate criminal liability applies to all organisations regardless of size. SMEs need to be aware of this expanded liability, which broadens the “directing mind and will” or “identification” principle by attributing criminal liability to a body corporate or partnership for the acts of their senior managers. The intention is to make it easier to prosecute companies and partnerships for certain economic crimes than it has been previously.
Many of the changes will involve a wholesale revision of Companies House systems, such as the identity verification measures and, therefore, will take time to implement. However, Companies House has confirmed that the first wave of changes will come into force in March 2024. These include:
- Greater powers to query information. This means that Companies House will be able to scrutinise and reject information that seems incorrect or inconsistent with information already on the register. In some cases, Companies House will be able to remove information.
- Stronger checks on company names.
- New rules for registered office addresses, which will mean all companies must always have an appropriate address. Companies will not be able to use a PO Box as their registered office address.
- A requirement for all companies to supply a registered email address.
- A requirement for all companies to confirm that they’re forming the company for a lawful purpose when they incorporate. Every year, the company will need to confirm that its future activities will be lawful on their confirmation statement.
- Annotations on the register to let users know about potential issues with the information that’s been supplied to Companies House.
- Taking steps to clean up the register, using data matching to identify and remove inaccurate information.
- Sharing data with other government departments and law enforcement agencies.
For further information, see our information and templates highlighted above or visit the government’s dedicated website on the upcoming changes here (external link). Whatever the source of your information, it will be important for you to prepare your company and be ready for these significant changes as the year progresses.