This consolidated corporate update summarises the major developments in UK corporate law and regulation which have occurred over the last six months and which will be of relevance to UK listed companies.

On the horizon: the most material developments expected in the next 6-12 months

Reform of Companies House – transforming Companies House from a largely passive recipient of information into an active gatekeeper – see item A1 below.

Failure to prevent fraud offence and identification principle – amendments have been tabled to the Economic Crime and Corporate Transparency Bill that will introduce a new failure to prevent fraud offence and significantly reform the identification principle – see item A2 below.

UK listing regime reform – radically reforming the nature and structure of the UK listing regime – see item D1 below.

Reform of the prospectus regime – overhaul of the prospectus regime, in particular for further issuances by companies that are already listed – see item E1 below.

A. Company law

1. Reform of Companies House

The Economic Crime and Corporate Transparency Bill (ECCT Bill), first laid in Parliament in September 2022, is currently having its third reading in the House of Lords. The ECCT Bill contains, among other things, draft amendments to the Companies Act 2006 to facilitate the reform of Companies House. The ECCT Bill is expected to become law later this year. We expect it to be brought into force at a later date, so that Companies House can fully prepare for the reforms.

For an overview of the ECCT Bill proposals, see our one-page snapshot here.

House of Commons

In January 2023, the ECCT Bill completed its journey through the House of Commons. Various amendments were made to the draft ECCT Bill, including:

  • Discrepancy reporting – The government will be given power to make regulations requiring any person carrying on business in the UK to report to Companies House discrepancies between: (i) information they receive from a customer or prospective customer; and (ii) information made publicly available by Companies House.
  • Overseas companies – The government will be given power to make regulations requiring an overseas company that has registered a UK establishment/branch with Companies House to supply a UK address for service and an email address to Companies House. The address for service will be made publicly available (but the email address will not).
  • Register of overseas entities that own UK property – Companies House will be given the power to remove information from the new register of overseas entities that own UK property, either of its own volition or on request.

House of Lords

The ECCT Bill began its passage through the House of Lords in January 2023 and is now having its third reading. A version of the Bill as amended by the House of Lords has been published, which includes several key additions:

  • New failure to prevent fraud corporate offence – See item A2 below.
  • Criminal offences relating to the register of members – A new duty will be imposed on members to notify to companies the information required to be included on the register of members (being the member's full name and a service address) and any changes to that information. Companies will also be able to serve a notice on members requiring them to provide the information. Failure to supply the information or the making of a false statement will be a criminal offence.
  • Nominee shareholders – Nominee shareholders will be required to declare whose control their shares are held under.
  • Sanctions and director disqualification – The Sanctions and Anti-Money Laundering Act 2018 will be amended so that individuals may be disqualified from being directors for breaches of the UK sanctions regime.

2. Failure to prevent fraud offence and the identification principle

New failure to prevent fraud offence

The government tabled amendments to the ECCT Bill in April 2023 that will introduce a new failure to prevent fraud offence for corporates.

Under the proposed new offence, an organisation will be strictly liable if:

  • a specified fraud offence is committed by an employee, agent or subsidiary; and
  • the organisation did not have reasonable fraud prevention procedures in place.

A list of the specified fraud and false accounting offences is set out in the legislation, and includes, for example, cheating the public revenue, false accounting and false statements by company directors. The Secretary of State will be given power to amend the list of specified offences by regulations.

The offence will:

  • apply to all large companies, LLPs and partnerships (including those incorporated outside the UK); and
  • be punishable by an unlimited fine.

The government will issue statutory guidance on reasonable prevention procedures.

For further information, see our briefing here.

Proposed amendments to the "directing mind and will" of a company

The government is also proposing to significantly reform the so-called "identification" principle for certain economic crimes through an amendment to the ECCT Bill. The government's intention is to make it easier to prosecute companies for the in-scope economic crime offences – particularly large companies with complex management structures.

A company may currently be criminally liable for the acts of its officers or employees. However, under the common law "identification" principle, for many offences – including fraud – that will only be the case if a prosecutor can identify an individual(s) whose conduct, and state of mind, can be attributed to the company, such that they represent the company's "directing mind and will". Particularly in large organisations, senior people who have decision making powers in respect of substantial areas of business are often not considered sufficiently controlling to hold the company liable.

The proposed amendment to the ECCT Bill places the identification doctrine on a statutory footing for economic crimes and will impose criminal liability on body corporates and partnerships for economic crime offences committed by their "senior managers". The proposed definition of senior manager in the ECCT Bill (which replicates the definition in the Corporate Manslaughter and Corporate Homicide Act 2007) looks at what the senior manager's roles and responsibilities are within the organisation, rather than their job title. It includes a person who plays a significant role in the making of decisions about the whole, or a substantial part, of the activities of the body corporate.

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