In an era marked by increasingly sophisticated financial crimes and muddy corporate structures, the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) is the second branch of significant legislative changes brought in to tackle abuse of UK corporate structures.
Following the 2022 Economic Crime (Transparency and Enforcement) Act which brought about the registration of overseas entities, the ECCTA seeks to build the UK's defences against illicit financial activities by improving the integrity of the information available at Companies House.
The legislative changes created by the ECCTA 2023 (which became law in October 2023) will be phased in through a series of commencement orders over the next year or more. While detailed implementation information is still limited, it is crucial for companies to anticipate how these changes will impact them. Below is an overview of the major changes.
Identity Verification
One of the most significant changes is the introduction of mandatory identity verification for directors and persons with significant control (PSCs). This extends to both existing directors and those newly appointed. Directors and PSCs who do not verify their identity, as well as companies with unverified directors, will be committing a criminal offence.
The documentation required for identity verification is not yet known. However, we do know that the verification process will need to be completed either through a new Companies House portal or by an “authorised corporate service provider” (ACSP).
Filing Documents at Companies House
The ECCTA 2023 introduces new requirements for how corporate entities interact with and submit information to Companies House. Currently, specific persons must sign certain documents submitted to Companies House, but anyone can deliver these documents. The ECCTA 2023 changes this by restricting the ability to file information on behalf of corporate entities to ID-verified individuals (as detailed above) and ACSPs.
Registered Office and Email Address (implemented in March 2024)
The ECCTA 2023 requires companies to have a registered office at an “appropriate address” where documents can be reliably received and acknowledged. PO boxes will no longer be acceptable. Companies must also have a registered email address for communication with Companies House, which must be monitored by a person acting on the company's behalf.
Company Registers
The ECCTA 2023 abolishes the requirement for companies to maintain their own internal registers of directors, directors’ residential addresses, secretaries, and PSCs. Thus, creating a central record for this information at Companies House. Companies will still need to keep internal registers of members and debentures. The option for private companies to maintain a central register of members at Companies House will be removed.
Ban on Corporate Directors
In 2015, the Government passed legislation to ban the use of corporate directors, but these provisions were never enacted. The ECCTA 2023 will now enforce this ban, incorporating a 'principles-based' exemption.
Restriction on Company Names
The ECCTA 2023 extends the criteria for prohibiting company names, including names that could mislead about a company’s activities or facilitate crime.
New Criminal Offences
The ECCTA 2023 introduces a new criminal offence of "failure to prevent fraud," holding companies and partnerships liable for not stopping employees, agents, or others acting on their behalf from committing fraud for the benefit of the organisation or its customers. This offence applies only to large companies, defined by the Companies Act 2006.
Enhanced Powers of Companies House (implemented in March 2024)
Companies House will gain enhanced investigative and enforcement powers, shifting from a passive recipient of information to an “active gatekeeper”. It will have the authority to verify or reject submitted information and share data with other government departments and law enforcement agencies.
Whilst we are still in the dark on the exact timetable of the implementation of all the changes, in March we saw the first round of commencement orders and the requirements for an appropriate registered office address and an email address came into force alongside the beefing up of Companies House powers.
Newly incorporated companies will be required to provide an email address upon incorporation and those already established will be required to provide one in the company confirmation statements due after the 5th March 2024.
For further information as to the impact the ECCTA 2023 may have on our business please do contact our Corporate Team.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
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The information published across our Knowledge Base is correct at the time of going to press.
