Economic Crime and Corporate Transparency Act 2023: key changes for companies

The Economic Crime and Corporate Transparency Act passed into law in October 2023. The Act makes far-reaching changes to UK company law which will have a significant impact on the day-to-day running of companies. Changes will be implemented by a series of commencement orders over a period of a year or more. Whilst we have limited information on implementation at this time; it is key that companies should consider early on how these changes are likely to impact on them. An overview of the major changes is set out below.

Identity verification

Possibly the biggest change of all, the Act introduces mandatory identity verification for directors and persons with significant control (PSCs). It does not apply to company secretaries.  Directors and PSCs who fail to verify their identity will commit a criminal offence as will companies who have unverified directors. 

The precise documentation required for ID verification is not yet known, but we do know that the verification process will either have to be undertaken through a new Companies House portal (as yet to be put in place) or by an “authorised corporate service provider” (see next section below). 

The change will have a significant impact on the running of companies. Existing directors will have to have their identity verified within a specified time period; new directors will have to have their ID verified within 14 days of their appointment. However it will be impossible to incorporate a new company unless the initial directors have had their ID verified before becoming a director. A director will also be prohibited from acting as a director unless their ID is verified within the applicable time frame.

More information in the Factsheet HERE.

Filing documents at Companies House

Currently, anyone is able to deliver documents to Companies House albeit that certain documents have to be signed by specific persons.

In future this will change so that only certain ID-verified individuals (directors, company secretary and employees of the relevant company) or an “authorised corporate service provider” (ACSP) will be able to file information at Companies House. An ACSP will be limited to persons who are regulated by money-laundering legislation such as legal advisers, insolvency practitioners, accountants, and auditors. ACSPs will need to register with Companies House.

Registered office and e-mail address – indicated for March 2024 implementation

The Act introduces a new requirement that the registered office of a company is located at an “appropriate address”. This means that a document delivered to that address would come to the attention of a person acting on behalf of the company and delivery at that address can be formally acknowledged. A company will not, for example, be able to use a PO box as its registered office.

A company will also need to have a registered appropriate e-mail address by which Companies House can communicate with it. This should be an e-mail address which would come to the attention of a person acting on behalf of the company. This address would not be visible on the public register at Companies House.

Company registers

Companies will no longer be required to keep their own internal register of directors, register of directors’ residential addresses, register of secretaries, and register of PSCs. The information will simply be filed and retained at Companies House which will be the central record to be relied upon. Companies will still retain other internal registers including register of members and register of debentures (the option for private companies to opt for a central register of members at Companies House will be removed).

Restriction on company names – indicated for March 2024 implementation

The Act extends the circumstances whereby a company name can be prohibited including where it gives a misleading impression of its activities or where the name could be used to facilitate crime.

Enhanced powers of Companies House – indicated for March 2024 implementation

In future, Companies House will have enhanced investigative and enforcement powers. Its role will move from that of a largely passive recipient of information to an active gatekeeper over company data with powers to verify or decline information submitted to it. There will also be powers to share data with other government departments and law enforcement agencies.

More information in the Factsheet HERE.

Other changes

A requirement for all companies to confirm on incorporation that they are forming the company for a lawful purpose and annually to confirm that the company’s future activities will be lawful (indicated for March 2024 implementation).

There will be changes to the preparing and filing of company accounts. All micro entities and small companies will be required to file their profit and loss account (the option of filing abridged accounts will be removed). Small companies will also be required to file a directors’ report. More information in the factsheet HERE.

It will not be possible to appoint an individual as a director if they are subject to a disqualification order. The person making the filing at Companies House will need to confirm that the individual is not disqualified.