The UK's Economic Crime & Corporate Transparency Act 2023: A guide to what you need to know

The Economic Crime and Corporate Transparency Act 2023 ('ECCTA') has now come into force introducing wide ranging reforms to tackle economic crime, prevent the abuse of UK corporate structures and improve corporate transparency and oversight.  

In summary, ECCTA will:

• Expand the powers of the Registrar of Companies, extending the Registrar's role to be closer to that of a regulator as well as custodian of more reliable data, and increase Companies House fees for incorporation and filing;
• Require identity verification of persons including new and existing directors, LLP members, PSCs, general partners of limited partnerships and all those filing information at Companies House;
• Impose greater control over administrative matters including company names, new requirements for company addresses, accounts and annual confirmation statements, as well as changes to record keeping obligations.  There are also changes to the registration and formation requirements for new companies;    
• Require both a member's forename and surname and service address to be filed on the Register of Members and impose a new obligation to file a one-off full shareholder list at Companies House.  However, ECCTA will increase the protection of personal information held by companies and provided to Companies House. Any person whose details appear on the register at Companies House can apply to have their personal information (including residential address and signature) suppressed from public view, although details regarding the grounds for such suppression are yet to be published. ECCTA also expands the categories of information that is protected from public view, such as identity verification documents for directors and PSCs and company email addresses;
• Abolish the requirement for companies to keep certain statutory registers, those being the register of directors, the register of directors' residential addresses, the register of secretaries and the PSC register. This obligation is replaced with a requirement to file specified information at Companies House. Companies will still be required to maintain a register of members;
• Amend the directors' disqualification regime to terminate the appointment of disqualified directors and expansion of the provisions for disqualification for persistent breaches of company law obligations;
• Enact existing statutory powers to restrict the use of corporate directors;
• Expand the annual accounts filing requirements for 'micro-entities' and small companies.   Unless exempt, 'micro-entities' will be required to file a balance sheet and a profit and loss account; filing a directors' report will be optional.  Small companies will be required to file a balance sheet, profit and loss account and a directors' report, rather than abridged accounts.  Software only filings will also be mandated;
• Change the ROE regime to ensure consistency with the Companies Act 2006 and create a new filing obligation for registered overseas companies;
• Create a new 'Failure to Prevent Fraud' offence for large companies;
• Expand the identification doctrine in relation to certain economic crimes by bringing senior managers within the scope of who can be considered the "directing mind and will" of a business;
• Provide additional powers to law enforcement so they are able more quickly and easily to seize and recover crypto assets which are the proceeds of crime or associated with illicit activity such as money laundering, fraud and ransomware attacks;
• Allow the Registrar to share data with government departments and law enforcement agencies such as HMRC and the National Crime Agency; and
• Strengthen the registration and filing requirements for limited partnerships and grant new powers for the registrar to deregister them.

Which changes are in force?

Due to the number of changes, the provisions of ECCTA are coming into force in stages.  

The provisions relating to the expansion of the identification doctrine in relation to economic crime came into force on 26 December 2023.  

With effect from 4 March 2024, the following largely administration specific provisions are coming into effect:

• all companies and LLPs must provide an 'appropriate' registered office address for receiving official communications from Companies House and other authorities.  In practice, this means that the registered office address cannot be a PO box or mail forwarding service.  If a company or LLP fails to provide or maintain an appropriate address without reasonable excuse, an offence is committed by the company or LLP and every officer who is in default, and the Registrar may be able to change the registered office to a default address;
• all new and existing companies and LLPs must provide a registered email address to Companies House where emails will come to the attention of someone acting for the company or LLP. This email address will be kept confidential from the public and will be used by Companies House to send important notices and reminders. The company or LLP and every officer in default commits an offence punishable by a fine if the company or LLP fails to maintain an appropriate email address without a reasonable excuse;
• all new and existing companies and LLPs must provide (on their incorporation documents and/or every annual confirmation statement after 4 March 2024) a statement from the subscribers or members confirming that the entity has been formed for lawful purposes;
• the Registrar will have new powers including greater control over company names, the ability to query and reject filings, rectify inaccuracies and annotate the Register when information appears confusing or misleading; and  
• the Registrar will also have new powers to share data with government departments and law enforcement agencies such as HMRC and the National Crime Agency.  

Looking ahead…

With effect from 1 May 2024, Companies House filing and incorporation fees will increase. Details of the new fees can be found on the Companies House website here: Companies House fees increasing from 1 May 2024 - GOV.UK (www.gov.uk). The increases are to cover the cost of enforcing the new powers of Companies House; the UK Government is confident that the UK remains a competitive jurisdiction in which to incorporate. 

Further information surrounding many of the provisions of ECCTA, and dates for their implementation, are still awaiting publication, including the notable new identity verification requirements and the 'Failure to Prevent Fraud' offence. It is therefore difficult at the moment to advise fully on the consequences of the more significant aspects of the legislation.  In the meantime, whilst further detailed secondary legislation and guidance is awaited, companies and LLPs are advised to:

• review their registers, records and appointments at Companies House and ensure that they are up to date, as well as consider which policies and procedures will need to be put in place in order to comply with the raft of new obligations and filing requirements resulting from ECCTA;
• if not already done, start to transition to software-only accounts filing; and  
• in the case of large companies, begin to review their existing fraud prevention measures. 

How can we help?

At Withers, we understand that ECCTA will impose a substantial administrative burden on companies, LLPs, limited partnerships and individuals in order to comply with the new requirements.   Our Corporate team continues to track ECCTA's progress and can advise on all aspects of implementation and compliance as more legislation is brought into force.  Our Company Secretarial team is dedicated to assisting all clients with successfully navigating the changes in practice.

If you have any question or concerns, please do not hesitate to get in touch with your usual Withers contact and we will be happy to help.

Finally, if you are interested in the new transparency rules being introduced in the US, please see here.