The Economic Crime and Corporate Transparency Act 2023 – how will it affect your company?
Big changes are on the way in 2024 for how UK companies, big and small, will be required to submit information and documents to Companies House. The regulator will also have a wider role and new powers that are likely to change how it interacts with companies.
In this blog, we highlight some of the key changes under the Act that are expected in 2024 and what these will mean for your company. We also suggest action you can take now to prepare for these changes.
New powers for Companies House
Companies House is being given enhanced powers so it can play a much greater role in tackling economic crime in the UK and the abuse of companies by criminals. At present, Companies House has very limited powers to correct or query information where there is a suspicion that something submitted is incorrect or fraudulent.
The Act will enable Companies House to become a much more active gatekeeper over company creation and the custodian of more reliable data. It will have the power to query and reject new information and documents filed with it, as well as existing information already on the register. It can ask you for additional information and require any inconsistencies to be resolved.
We will need to wait and see how Companies House chooses to exercise its new powers. Companies have been promised new guidance from the regulator to help them understand how and why the new powers might be used – we will look out for this in coming months.
Companies House has also confirmed that the fees payable by companies will be increased from early 2024 to cover the costs of its new role and functions.
Company administration changes
Various changes to administrative procedures and reporting requirements will be introduced by the Act on 4 March 2024. These include:
Addresses: companies will be required to supply a registered email address and at all times have an appropriate physical address for their registered office, meaning they will not be able to rely on a PO box for the registered office address.
Lawful purposes and activities: on incorporation, companies will have to confirm they are forming the company for a lawful purpose and each year confirm that the company's future activities will be lawful.
Company names: there will be stronger checks on company names that may give a false or misleading impression to the public.
Filings at Companies House and the new identity verification scheme
The Act will make it much harder to register fictitious directors or beneficial owners, and to make anonymous or unauthorised filings at Companies House. It will also discourage the hiding of company control through nominees or opaque corporate structures.
The following will all need to have their identity verified:
- all existing directors and persons with significant control (PSCs);
- all new registered company directors and PSCs; and
- those filing documents with the Registrar.
A date will be set by which all existing directors and PSCs must have verified their identity – this date is as yet unknown, but it is likely to be later in 2024.
There will be two ways of verifying someone's identity:
- Direct verification: a person can open an account with Companies House and verify their own identity directly.
- Indirect verification: a person can use an Authorised Corporate Service Provider (ACSP) (such as accountants or a law firm) that will check their identify and then submit a statement to Companies House.
Directors will be prohibited from acting unless their identity has been verified or they fall within an exemption (a list of exemptions is yet to be published). It will be an offence for a person to act as a director before their identity has been verified.
Action you can take now
- Agree internally who will take responsibility for keeping up-to-date with the implementation of the new Act and ensuring your board is aware of when the new changes come into effect.
- Keep an eye out for further blogs from us when key changes come into force – we plan to publish a series of more detailed blogs explaining how the main changes impact your company.
- Review the appropriateness of your company's email address and registered office address.
- Check that you know who your company's members are and that you have up-to-date information about them in your register of members.
- Consider how you make filings at Companies House and if this can continue under the new filings regime which will restrict who can file documents with the regulator.
- Ask your directors and any PSCs if they have up-to-date identity documents available so they can be prepared to verify their identity when the new identification regime comes in later in 2024.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
