The future of corporate compliance: A guide to The Economic Crime and Corporate Transparency Act
29th November, 2023
The Economic Crime and Corporate Transparency Act (the Act) received Royal Assent on 26 October 2023 which brings in new provisions to tackle economic crime and create corporate transparency. The Act is aimed at tackling abuse of corporate structures by introducing some major changes for companies.
As yet, the government is yet to announce an implementation date and we await further guidance being published.
However, some key changes that will be brought in by the Act are as follows.
Identity verification
The Act introduces a mandatory requirement for all new and existing registered company directors, People with Significant Control and those delivering documents to the Registrar to verify their identity. Identity verification will also apply to all members of a limited liability partnership (LLP).
There will be two ways to verify identity, either directly via the Registrar of Companies or through the use of an Authorised Corporate Service Provider.
These verification checks will also be required when setting up a new company.
It will be a criminal offence for an individual to act as a director while their identity is unverified and the company will also commit a criminal offence if it allows a director to act while unverified.
We await further government guidance as to how these identity checks will operate and the timescales within which existing directors will have to comply, and will provide further updates once we have more information. In the meantime, it is important that you start to prepare for the implementation of the Act which you can do by ensuring that your company information is up to date at Companies House and also ensuring that all People with Significant Control have been properly identified and registered.
Registered office
All companies will have a duty to maintain its registered office at an “appropriate address.” An address is an “appropriate address” if, in the ordinary course of events:
- a document addressed to the company, and delivered there by hand or by post, would be expected to come to the attention of a person acting on behalf of the company, and
- the delivery of documents there is capable of being recorded by the obtaining of an acknowledgement of delivery.
Companies will no longer be able to use a PO Box as a registered office address.
Companies House will have the power, where a registered office address is not an “appropriate address,” to change it to a default address. If a company’s registered office is moved to the default address, it will have to provide an “appropriate address” within 28 days, or Companies House may start the process to strike the company off the register.
You should therefore review your current registered office address and ensure that it will be deemed “appropriate” under the new regime. Please contact us for information on Ward Hadaway’s registered office services if required.
Companies will also be required to provide and maintain a registered email address. Companies House will use this email address to communicate with the company – it will not be available to the public. As from early 2024, new companies will need to give a registered email address when they incorporate. Existing companies will need to give a registered email address when they file their confirmation statement, also starting from early 2024 (exact dates to be confirmed in both cases).
Corporate directors
There will be a ban on the appointment of corporate directors (old and new) unless you can satisfy the exception which is that you may have one corporate director who is a UK registered company provided all directors of that company are natural persons who have gone through the new verification checks. You should take action now to review whether your company has any corporate directors which may be affected.
Statutory registers
The Act revokes the option for UK companies to elect to store statutory registers with the Registrar of Companies.
It also abolishes the need to maintain some internal statutory registers being the Register of directors, Register of directors’ residential addresses, Register of secretaries and Register of People with Significant Control. Instead, a company must ensure this information remains updated on the public Register at Companies House and this will be the record relied upon for this information.
The period for making filings for directors and secretaries will remain 14 days from the date of appointment, resignation or change in details but under the Act it will be an offence for an individual to act as a director if their appointment has not been filed with Companies House within the 14-day deadline. In respect of updating information and details for PSCs, the deadline will be 14 days from the date on which the company receives confirmation of the PSC’s details which it needs to file at Companies House.
These new offences make it all the more important for companies to deal with company secretarial matters promptly and accurately.
You should therefore review your company’s statutory registers now to ensure that they are correct and up to date as well as ensuring that the information held by Companies House is correct.
Accounts
All accounts will need to be digitally submitted to Companies House using appropriate software to file accounts within a digital format. Companies House have confirmed that the move to digital submission will be phased in over the next 2-3 years and we await a timetable in respect of this being published.
It is proposed that accounting periods will only be able to be shortened once every 5 years – currently a company may shorten its accounting reference period as many times as it likes.
Abridged and filleted accounts will be removed and there will be changes to filing requirements for small companies and micro-entities.
You should contact your accountants for advice and assistance on how this may impact you.
Confirmation Statements
When filing a confirmation statement there will be a requirement to deliver to the registrar a statement that the intended future activities of the company are lawful. This will apply to all confirmation statements with a statement date from early 2024 onwards but we await confirmation of an exact implementation date.
Ward Hadaway can assist with filing your company’s confirmation statement as part of our annual company secretarial services. Please contact us for more information.
Conclusion
Whilst The Economic Crime and Corporate Transparency Act has received Royal Assent, we await implementation dates, and publication of further guidance. We will continue to monitor for further updates and will provide more detail as soon as they become available to ensure that you are prepared when these changes come into force.
Please also refer to our recent update on the ‘failure to prevent fraud’ offence which is also being brought in by the Act.
In the meantime, if you have any questions in respect of The Economic Crime and Corporate Transparency Act, please do not hesitate to one of our specialist commercial lawyers.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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