The Economic Crime and Corporate Transparency Act 2023 (ECCTA) marks the latest attempt to tackle the risk of fraud and money laundering in the UK. The regulatory changes made by the ECCTA will impact not only the day to day of running your business, but also the wider structure and regulation of your company.
Due to come into force throughout 2024, the ECCTA seeks to stamp down on fraud by increasing the powers of Companies House and creating new offences for companies who fail to prevent fraudulent activities within their business.
There are a number of practical steps which all companies must take in order to comply with the ECCTA and we outline key points below.
Reforms to filing and statutory registers
- Companies House will have new powers to check, reject or remove information submitted to or on Companies House and higher fees may be payable when submitting certain forms.
- All companies will be required to:
- provide a relevant email address for use by Companies House (we note this will not be publicly disclosed); and
- submit a director’s statement and profit and loss account (even where they were note previously required to do so).
- The ECCTA introduces the possibility of nominee shareholders having to disclose their nominee status to Companies House and notify who they hold shares on behalf of.
- There will also be various obligations on general partners to notify Companies House of changes to a limited partnership, which will include appointment or resignations of partners, address and principal place of business and certain information about partners.
- There will no longer be an option to store statutory registers with the Registrar of Companies;
- Full names and address will require to be noted in the register of members and abbreviations will no longer be accepted; and
- The ECCTA removes the need to keep a register of directors, register of secretaries and a register of persons of significant control, instead this information will only be kept on Companies House.
Identity verification will be mandatory for all:
- directors (including equivalents of other entities such as members of an LLP);
- persons of significant control (PSC); and
- individuals who file on behalf of an entity on Companies House.
It is important to note that an individual will not be permitted to deliver or file documents to the Registrar of Companies, unless they have been verified (as below) or are an Authorised Corporate Service Provider (such as Macdonald Henderson or another regulated organisation).
How do you verify yourself?
Although full details are still to become available, it is expected that you will be able to verify yourself either:
- directly via Companies House by:
- Creating an account on Companies House > uploading an accepted form of ID > biometric (live picture) checks (similar to Macdonald Henderson’s ID partner, Amiqus’s, process); or
- through the use of an Authorised Corporate Service Provider.
Any corporate directors (companies that act as director of another company) must be registered within the UK, removing the ability of an overseas corporate director being a director of a UK registered company.
In the case of a UK registered corporate director, all directors of that company must be natural persons, that is to say you cannot have a corporate director behind another corporate director.
It is important to check your companies’ group structure to ensure that you will not be in breach of these new changes to UK company law.
Failure to prevent fraud obligation and economic crime
Under the ECCTA, organisations will be liable if an employee commits fraud for the benefit of the organisation and the organisation does not have suitable fraud prevention measures in place. The failure to prevent fraud offence will only be applicable if your organisation satisfies two of the three conditions: more than £36m turnover and/or more than £18m balance sheet and/or more than 250 employees.
In addition, organisations may be liable for economic crimes of senior officers acting within their scope of their position and organisations will need to put procedures in place to limit the likelihood of a senior officer committing such offence.
The ECCTA represents significant changes to the way in which the structure of your organisation is regulated and there are a number of practical steps to be taken for your organisation to get ready for the changes introduced under the ECCTA:
- Check Companies House for any errors in the information held on the public register;
- Check who can submit information on Companies House for your organisation and whether they will be required to submit ID before they can file for your organisation; and
- Check if any company has any corporate directors appointed.
- Identify who in your organisation will be subject to ID checks, including directors (or equivalent), PSCs and those submitting information to Companies House; and
- Identify who should receive notifications to the registered email on Companies House for your organisation.
- Update or implement fraud prevention measures and put procedures in place to mitigate the likelihood of senior officers mistakenly committing economic crimes;
- This is a good time to ensure your company books, and indeed Companies House, are fully up to date and includes a fully updated (non-abbreviated) register of members; and
- You will also need to stay up to date with the latest developments and implementation of the ECCTA (or secondary legislation), including when you need to implement certain changes.
If you have any questions in respect of the new UK company law changes or the impact on your business, then please get in touch with our Corporate Team who can advise on all aspects, including implementing the changes to your business.
Solicitor, Corporate Trainee Solicitor, Corporate