The Economic Crime and Transparency Act 2023
16/09/2024
The Economic Crime and Corporate Transparency Act 2023 (“ECCTA”) will significantly change the way in which companies registered in England and Wales file information at Companies House and introduce other important provisions designed to reduce economic crime and increase corporate transparency.
The changes include:
- new identity verification requirements for directors and persons with significant control (PSCs/RLEs) of companies and for members of limited liability partnerships;
- restrictions on who can file documents at Companies House;
- new powers for Companies House to query, remove or reject filings;
- restrictions on the use of corporate directors;
- a requirement to confirm a registered email address to Companies House;
- changes to certain record keeping and filing requirements; and
- new accounts filing requirements, including: for small companies and micro-entities to file their profit and loss account; and for small companies to file their directors’ report.
Identity verification
Identities of existing and new directors, PSCs/RLEs and members of LLPs will need to be verified by uploading identity documents (passport/driving licence etc). Sanctions and/or penalties will likely apply in the case of a failure to comply. It will be an offence for an individual to act as a director while their identity has not been verified, with a transitional period expected to be introduced to enable compliance.
Verification will be made either directly via Companies House or through an Authorised Corporate Service Provider (“ACSP”) such as a legal or accountancy practice who already carry out anti-money laundering checks. Individuals delivering documents to Companies House will, broadly speaking, be required to have had their own identity verified or be an ACSP or an officer or employee of an ACSP.
Corporate directors
Existing legislation restricting the use of corporate directors will be brought into force, together with regulations setting out limited exceptions for their use. It is expected that corporates with “legal personality” will be able to act as corporate directors, provided their own directors are natural persons whose identity has been verified. A transition period of 12 months will apply to give existing companies with corporate directors time to comply.
Information about members
Specific information about members (first name, surname and service address) will need to be included in registers of members and old information in respect of members and former members will need to be retained. Companies will be able to require members to provide information. Once the regulations have come into force, traded companies and non-traded companies will be required to deliver a one-off confirmation statement to Companies House. For non-traded companies, the statement will include the name of, and number and class of shares held by, every member at the confirmation date.
Statutory registers
Under the new regime, companies will no longer be required to maintain a register of directors, register of directors’ residential addresses, register of secretaries or PSC register, as all the relevant information will be held at Companies House.
Companies House powers
With effect from March 2024, Companies House has new powers to reject filings which are potentially fraudulent or suspicious, compel the provision of information about any questionable filings and impose sanctions for a failure to comply. In response to concerns raised over possible consequential filing delays, Companies House has confirmed they will use their new powers “sparingly”. Filing fees are set to rise with effect from May 2024.
Accounts filing
All small companies and micro-entities will be required to file their profit and loss account (with limited privacy exceptions expected to be announced by the government); and small companies will be required to file their directors’ report. Furthermore, where a company qualifies for an exemption from audit, its balance sheet will need to state why it so qualifies.
Registered email address and registered office
UK companies will need to have as their registered office an “appropriate address,” meaning an address where delivery can be acknowledged and be expected to come to the attention of someone acting on behalf of the company. This would not include a PO Box or an unstaffed address. Companies will also have to confirm to Companies House, in the first confirmation statement they file after 5 March 2024, a registered email address for Companies House to use, which will not be publicly available.
Timing and actions
The registered email address and registered office requirements and the new powers of Companies House to reject filings and compel the provision of information in respect of questionable filings are already in force. Other provisions will come into force under further legislation in the coming months – in some cases, possibly not until 2025. In readiness, however, businesses should sensibly:
- identify those to whom the new identity verification requirements will apply;
- ensure that Companies House filings and company registers and records relating to shareholders, PSCs/RLEs and directors are correct and up to date;
- consider how Companies House filings should be dealt with once the regulations are in force;
- assess what steps may need to be taken in relation to any corporate directors;
- identify a registered email address to be confirmed to Companies House; and
- liaise with accountants to determine the impact (if any) of the new accounts filing requirements.
This article is not legal advice, which it may be sensible to obtain before you take any decisions or actions in the areas covered. Please do contact me if you would like an initial discussion of your situation.
