The Economic Crime and Corporate Transparency Act 2023 (“ECCTA 2023”) has introduced important changes to UK company law which will allow the Registrar of Companies to play a more prominent role in tackling economic crime, and supporting economic growth and enterprise. It is anticipated that over time, these new provisions will lead to greater transparency, and will improve the accuracy and reliability of company information made publicly available on Companies House. 

It is anticipated that most of the changes will take effect from March 2024. 

Improving the quality of data and Assigning Greater Registrar Powers

The Act predominantly establishes 4 new statutory objectives for the Register of Companies for England and Wales when performing their functions:

1. To ensure that anyone who must deliver a document to the registrar does and that they comply with the requirements of proper delivery; 
2. To ensure that all information within the register is accurate and that the register holds everything it should; 
3. To ensure that all records that are kept by the register do not create a false or misleading impression to members of the public; and 
4. To prevent companies and others from carrying out unlawful activities or facilitating the carrying out by others of unlawful activities. 

In addition to these new statutory objectives, from March 2024 the Registrar will be assigned ‘greater’ powers that will enable them to meet their statutory objectives: 

• Power to query and challenge information that appears to be incorrect or inconsistent with the information currently held on the register; 
• Power to remove information much more quickly (should it be inaccurate, incomplete, false or fraudulent); 
• Power to perform more comprehensive checks on company names to improve the accuracy and data that they hold, and to deal with the misuse of company names; and  
• Power to use annotations on the register to let users know about potential issues with the information that they have supplied to Companies House. 

Enforcement and sanctions

If a company fails to respond to a formal request from Companies House for more information, the consequences can now be financial penalties, an annotation on the company’s record and in some cases prosecution, all of which could be damaging to the reputation of individual companies. 

Registered office addresses 

Companies will now be required to use  an ‘appropriate address’ as their registered office. An ‘appropriate address’ is anywhere where documents should be expected to come to the attention of a person acting on behalf of the company and where any documents sent to that address can be recorded by an acknowledgement of delivery. 

As a result, Companies will no longer be able to use a PO box as their registered office address. 

If a company does not comply with this provision, Companies House will have the power to change the address to a default address, held at Companies House. Once a company is registered at the default address, the directors will need to provide an appropriate address with evidence of proprietary ownership within 28 days, or Companies House may begin the process of striking the company off the register. 

Lawful purpose statements

When incorporating a company, the subscribers to the company will need to confirm that they are forming the company for a lawful purpose and that its intended future activities are lawful. 

Identity Verification 

As a means of preventing criminals from using companies for illegal or illegitimate purposes, the legislation introductions a new identity verification process for all new and existing company directors, people with significant control (“PSCs”), members of LLPs, or anyone else who files on behalf of a company. 

ECCTA 2023’s implementation means that anyone setting up, running, owning or controlling a company in the UK will now be required to verify their identity. 

For new companies all directors and PSCs will need to complete identity checks before a new company can be incorporated. For existing companies all directors and PSCs will have a transition period to verify their identity with Companies House. 

Anyone acting on behalf of a company will also need to verify their identity before they can file information for that company. 

Companies House will provide two options for individuals who need to verify their identity by allowing them to either do so directly with Companies House or by using an authorised agent. An authorised agent may be an individual or organisation such as an accountant or solicitors, that undertakes anti-money laundering checks, and may declare to Companies House that they are happy that all necessary verification checks have been completed. 

The identity verification protocol is subject to further guidance being released. 

Accounts

Companies House will also be transitioning to filing accounts by ‘software only’ over the next 2/3 years as it is thought that this will provide effective and secure filings for companies and contribute towards a fully digital filing service. It means that many companies may need to search for suitable software so that their accounts can be successfully filed with Companies House. 

There have also been several changes to the accounts filing options for small and micro-entity companies, which will now need to file their profit and loss accounts. Further to this, there is now a requirement for small companies who do not qualify as micro entities to file a directors’ report. Another change sees the removal of the option to file ‘abridged’ accounts. 

In summary, Companies House have taken the approach that having fewer filing options will invariably help to prevent confusion and reduce costly mistakes.

A final change to accounts relates to claiming an audit exemption and the requirement for any company that wishes to claim an audit exemption to provide an additional statement from their directors on the balance sheet. The directors will additionally need to make it clear which exemption is being claimed, and also confirm that the company qualifies for that exemption. 

Changes to Companies House fees

Companies House are also set to increase their fees this year. 

These fees are set on a cost recovery basis, which means that the fees cover cost of the services provided, (rather than to create a profit), so the increased fees will cover the costs of the new powers and functions of the Registrar. 

Presently there has been no official update on the exact changes to Companies House fees or when they will come into effect, but we will keep you updated. 

Data Protection 

Appreciating that personal information should only be published when it is considered ‘necessary and proportionate to do so’, Companies House have also emphasised the importance of introducing measures which allow for the suppression of personal information. Personal information may include residential addresses, signatures, business occupation and day of birth documents.

A process is set to be introduced which will allow individuals who are listed on the Companies House register to make an application to have their personal information ‘suppressed’ from the view of the public. 

Companies House have also stated that they will take all measures to protect information from being publicly available on the Companies House public register in relation to individuals who may be at risk of physical harm or violence, if there personal information was to be on the public register. 

At this stage, it is anticipated that secondary legislation will need to be introduced before these changes are implemented.  

Improving transparency of company ownership 

The concept of making company ownership more transparent is another significant aim of ECCTA 2023. 

Once the measures are officially in place, there will be an obligation placed on companies to:

1. record the full names of any shareholders (including individuals and corporate members/firms) within their company registers; and
2. provide a ‘one-off’ full shareholder list, enabling Companies House to portray any shareholder information in a much more accessible way than currently. 

Changes to limited partnerships (“LP”)

The Act also provides new obligations for limited partnerships and in particular, will require them to file more information. 

Once secondary legislation is introduced, LP’s will need to:

• provide partners’ names, full date of birth and their usual residence address;
• verify the identity of general partners; 
• provide a registered office within the UK; 
• provide a standard industrial classification code; and 
• file an annual confirmation statement. 

Unlike companies, LP’s will need to file the information above by using an ACSP that is registered with Companies House. 

A further development will also see the Registrar assigned new powers that will allow them to close and restore limited partnerships, apply sanctions, protect partners’ information and operate a statutory compliance process. 

Investigation, enforcement and data sharing 

ECCTA 2023 will also provide the Registrar with greater investigation and enforcement powers, and allow them to share data with law enforcement agencies and other government departments if they suspect filing errors or any other behaviour that warrants an investigation.

Confirmation Statement Changes

Companies will need to also provide a registered email address that will be used to facilitate correspondence between each company and Companies House. New companies will have to  provide their registered email address upon incorporating, with effect from March 2024, and existing companies, will need to give a registered email address on confirmation statements filed from March 2024. 

The Removal of Certain Registers

Finally, ECCTA 2023 removes the requirement for companies to maintain their own: Register of directors, register of directors’ residential addresses, register of secretaries and PSC register. 

Contact

For assistance, please get in touch with our corporate team and we would be happy to help.