How the Economic Crime and Corporate Transparency Act 2023 (ECCTA) Affects Businesses
The landscape of UK corporate regulation is undergoing a significant transformation with the recent introduction of new Companies House regulations and the expanded powers under the ECCTA. The ECCTA is designed to enhance corporate transparency, strengthen corporate governance and tackle economic crime, and while the changes imposed by this legislation aim to create a safer and more transparent business environment they also present new challenges for companies.
What changes are already in effect
The first phase of reforms under the ECCTA was implemented on 4th March 2024 and introduced significant changes to business filing and reporting requirements, including:
Registered Office Requirements
Companies are now required to ensure that their registered office address is "appropriate". This means that documents delivered to the registered address should come to the attention of a person acting on the company’s behalf and the address must be capable of having delivery and receipt acknowledged. Additionally, PO Boxes are no longer permitted as registered office addresses.
If the registered office is inappropriate or not functional, the company could face sanctions from Companies House including the company being struck from the register or facing financial penalties for failure to keep proper business records and compliance.
Registered Email Address
Similarly, companies must provide and maintain a registered email address through which they can be contacted by Companies House. As with the registered office address companies will have a duty to maintain an appropriate registered email address.
If a company does not provide or maintain an adequate email address, this is considered an offence under the new law. Companies House may impose financial penalties for failing to maintain a proper email address. Repeated failure could lead to further enforcement actions, such as legal proceedings, or the company may face being struck off from the Companies House register.
Lawful Purpose Confirmation
All companies are now required to confirm upon incorporation that their formation serves a lawful purpose. Additionally, every company must affirm in their annual confirmation statement that the company's intended future activities will remain lawful.
If a company fails to make this confirmation or is found to be engaged in unlawful activities, the directors or the company could face fines or criminal penalties for falsifying statements or for involvement in unlawful operations. Failure to submit an accurate confirmation statement may also lead to administrative penalties and/or legal action.
Registrar Powers
Companies House now has been granted greater power to challenge and reject information that conflicts with information previously filed by companies. Failure to respond to formal requests from Companies House in this regard may result in serious consequences, including (without limitation) financial penalties, the company being struck off the register and director disqualification.
Company name checks
New restrictions on company name registrations allow Companies House to direct a company to change its name if it does not comply with the new regulations. If a company does not comply with the direction to change its name, Companies House has the power to enforce a name change. The company may also face fines or other sanctions for failing to comply.
Upcoming Changes
Other reforms will be rolled out in stages over the course of 2024 and 2025, including:
Identity verification
The ECCTA will introduce mandatory identity verification for all new and existing company directors, PSCs and individuals submitting documents to Companies House. Identity verification is generally a one-time process, granting verified status across all roles within any company. Failure to verify will be a criminal offence, and companies with unverified directors will be considered non-compliant.
The specifics of the verification process will be outlined in forthcoming regulations, but it is anticipated that there will be two verification methods: direct verification with Companies House or indirect verification through an Authorised Corporate Service Provider (ACSP).
Under the ECCTA, an ACSP must be a professional, such as an accountant, lawyer, or company formation agent, who is regulated by an anti-money laundering (AML) supervisory body like the FCA, HMRC, or professional associations such as the ICAEW or Law Society. ACSPs are responsible for verifying the identities of individuals associated with companies and ensuring compliance with the new filing and reporting requirements. They must be fit and proper persons, and failure to meet these obligations can result in financial penalties, criminal charges, or disqualification.
As an ACSP, Turley Legal can assist you with your requirements in this regard.
Company filings
The ECCTA will restrict the individuals authorised to file documents at Companies House on behalf of a company. This authority will be limited to verified officers or employees of the company, or an ACSP and its verified officers or employees.
Directors
As mentioned above, it will be an offence for a person to act as a director unless their identity has been verified and their appointment has been reported to Companies House within the statutory deadline. Persistent failure to comply with identity verification requirements or filing obligations will now constitute grounds for disqualification.
Statutory Registers
The ECCTA will remove the requirement for companies to maintain registers of directors, directors' residential addresses, secretaries, and PSCs. Instead, all relevant information will be submitted directly to, and be maintained by, Companies House.
However, companies must still keep their own register of members, which will include standardised information such as full forenames, surnames, and service addresses. Once these provisions take effect, companies will also need to submit a one-off list of shareholders with their first confirmation statement after implementation.
How to prepare for the upcoming ECCTA changes
Identity Verification: Establish procedures for verifying the identity of directors, PSCs, and anyone filing documentation at Companies House on your company’s behalf. Ensure you collect the necessary identification documents and set up a process for verifying and reporting new directors to Companies House.
Review Filings: Audit all Companies House filings to confirm that information on directors and PSCs is accurate and up-to-date before the removal of statutory registers. Plan to maintain any necessary internal records thereafter.
Register of Members: Ensure your register of members complies with the new standardised requirements, and prepare to generate a one-time shareholder list. If this register is currently maintained at Companies House, take steps to recreate and manage it internally.
How can we help
At Turley Legal, we can help you navigate the complexities of the ECCTA; from identity verification, correcting historical filing inaccuracies through to the maintenance of your register of members going forward. Our expert guidance can help ensure your business stays compliant with the new regulations, ensuring you are putting your best foot forward from a corporate governance perspective which will minimise any risk of future penalties.
For more information, please contact our Corporate Team.