The Economic Crime and Corporate Transparency Act 2023 and what it means for your business

The Economic Crime and Corporate Transparency Act 2023 (“ECCTA” or “The Act”) received Royal Assent on 26th October 2023. From Monday 4th March 2024 the first set of substantive changes came into place and so it is important that companies and their legal teams are well versed with what the changes are, what they mean and how they can comply.

This article is designed to explain a few of the key changes being made by ECCTA and how we can assist your company in making sure you are compliant.

ECCTA was brought in as part of the Government’s plans to tackle economic crime. It has long been apparent that criminals use the pretence of a new company to commit fraud and money laundering. The Act aims to prevent this through improving the reliability and quality of data provided on Companies House and tackling the misuse of the companies register.

With effect from 4th March the Registrar has enhanced powers to query information provided on Companies House and request additional information so that it has more of a gatekeeper role, where previously it has just been a passive recipient of information. We do not yet know how this will play out in practice but we can expect an increase in the amount of queries being raised. Companies House will have this power for not only new information added to the register but also for information which is already on the register if it believes it may be suspicious or fraudulent.

Practical changes brought about by the Act for companies to comply with include:

• Companies Registered Office – this must now be an appropriate address where it can be expected that any documents will reach or come to the attention of a person acting on behalf of the company. Companies can no longer use PO Box addresses.
• Introduction of a Registered Email Address – every company must have an appropriate email address, which must be provided to Companies House. It is expected that any email sent to this email address will reach a person acting on behalf of the company.
• Declaration of Lawful Purpose – for existing companies when your next confirmation statement is due you will be prompted to make a statement that intended future actions of the company are lawful. If you are in the process of forming a new company you will be asked to make a similar statement upon incorporation stating that you are forming the company for a lawful purpose.
• Stronger checks on Company Names – the Registrar may refuse to register a new name for a company where it may give a false or misleading impression to the public. The new powers include the ability to refuse if the company name includes computer code or suggests a connection with a foreign government.

It is also worth noting that the information which Companies House now has access to has increased, as they have the ability to share and receive data from other governmental departments and law enforcement agencies.

Failure to comply with the new measures may result in a criminal offence or a civil penalty being imposed.

Furthermore, the Act provides for the introduction of a new identity verification process which aims to create certainty that individuals in a company are who they say they are. This will apply to all directors and people with significant control. There will be an option to either verify your identity through Companies House online or through an Authorised Corporate Service Provider (ACSPs) such as a Solicitors firm who are registered as an ACSP. There will be more information released by the government on this process over the next few months, there is likely to be a transitional period for individuals in existing Companies.

From the 1st May 2024 there will also be increases to Company incorporation and registration fees, this includes an increased charge for filing confirmation statements.

Woodfines can assist you in making sure you and your company are aware and compliant with these new measures. If you would like to know more about how these changes may affect you and your business then please reach out to our Corporate & Commercial team.

Information accurate as at 26.03.2024

Sources:

Companies House begins phased roll out of new powers to tackle fraud – GOV.UK (www.gov.uk)

Economic Crime and Corporate Transparency Act 2023: Factsheets – GOV.UK (www.gov.uk)

Identity verification – Changes to UK company law