Guidance Issued on Companies House Approach to its Enforcement Powers

Enforcement powers to issue financial penalties under the Economic Crime and Corporate Transparency Act 2023

Since 2 May 2024, Companies House (CH) has had the power to impose civil financial penalties for most offences under the Companies Act 2006 (CA). These fining powers were granted to CH under the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 made under the Economic Crime and Corporate Transparency Act 2023 (ECCTA). 

The explanatory memorandum to the Regulations noted that CH would not exercise its new fining powers until it had published guidance on their use. CH published its guidance on 27th September 2024 and in the outline to its implementation timetable published on 16th October 2024, CH has stated that it should be able to issue financial penalties for any relevant offences under the CA and the ECCTA as of autumn 2024. The guidance outlines CH’s anticipated approach to exercising its enforcement powers.

The Regulations empower the registrar at CH to impose a financial penalty on a person if it is satisfied beyond a reasonable doubt that a person has engaged in conduct amounting to a relevant offence under section 1132A CA.

The term “relevant offence” has a wide-ranging meaning and includes any offence under the CA other than an offence under provisions which deal specifically with company secretaries (part 12), resolutions and meetings (part 13) and audit (part 16).

There are several options regarding enforcement, including imposing financial penalties, seeking court orders to secure compliance, launching criminal proceedings and seeking director disqualification orders. In considering these options, CH will aim for its enforcement action to be proportionate to the harm and seriousness of the breach of law as well as considering the gravity of the offence and the frequency with which an entity fails to comply. CH has stated that it will take a risk-based and proportionate approach to exercising its enforcement powers. For example, for entities that are generally compliant but occasionally fail to file on time, CH will engage in providing support and guidance and limiting penalties to fines, whilst for those that commit more frequent and inaccurate filings, CH envisages using its querying powers, seeking court orders and prioritising prosecutions for false filings. In serious cases, this may escalate to seeking a director disqualification order, imposing financial penalties or striking a company off.

Before imposing a penalty, CH will issue a “warning notice”. This will state that CH suspects an offence has been committed and giving the recipient 28 days to make representations. The warning notice will set out:

1. the grounds for suspecting an offence have been committed;
2. a period within which representations can be made to the registrar;
3. how to deliver a representation; and
4. a warning that at the end of the given period, the registrar may impose financial penalties.

If a person takes the required action to which a warning notice relates (e.g. filing a confirmation statement that is late) within 28 days of the warning notice, no financial penalty will be imposed. If a representation is made within 28 days of the date of the warning notice, no decision will be taken by the registrar until all the information has been considered. If, after this period, the registrar is satisfied beyond a reasonable doubt that a person has engaged in conduct amounting to a relevant offence, a penalty notice may be issued.

A penalty notice must contain:

• the grounds for issuing the penalty;
• the type of penalty; 
• the amount of the penalty and how it was calculated;
• how to pay the penalty; 
• the rights of appeal; and
• the consequences of not paying.

Penalties are based on the seriousness of the offence and whether the person is a repeat offender. Penalties will broadly range from £250 for a minor first offence to £2,000 for a very serious offence committed by someone for whom it is their fourth or more offence. Penalties may include a fixed penalty, a daily rate penalty and a combination of a fixed and daily rate penalty.

There is also an appeals process set out in the guidance. Appeals must be made within 28 days of the penalty notice, served on the registrar within 7 days of the date on which permission was granted, and can only be on the basis that the decision to issue the penalty was: 

1. unlawful, irrational/unreasonable;
2. made based on a procedural impropriety; or
3. otherwise contravenes the rules of natural justice.

A copy of CH’s guidance can be accessed here.