The Economic Crime and Corporate Transparency Act 2023: First phase of implementation

With the first phase of implementation anticipated on 4 March 2024, we consider the impact the new requirements may have on your organisation.

The Economic Crime and Corporate Transparency Act 2023 (the Act) received royal assent in October 2023 and promised a raft of new provisions designed to combat economic crime and provide the public, investors, and government agencies with reliable information about registered entities.

Companies House is set to move away from a more passive role as the registrar of companies, towards an active gatekeeper with powers to test and police the reliability of information presented to it. Similarly, several key changes are being made to the reporting and filing requirements for companies and directors. Below we explore the key changes, both in this implementation phase and in future, and what they may mean for your organisation.

It is worth noting that no implementation date has been fixed for the future phases of the Act, and in many places the finer procedural aspects will rely on the creation of additional regulations and systems.

The first phase of implementation

Registered office and email addresses

Though companies are currently required to have a registered office, the Act introduces a new requirement that such addresses be “suitable”. It must be expected that a document delivered to this address would come to the attention of a person acting on behalf of the company, and that acknowledgement of delivery can be obtained. Whilst companies will still be able to use a third party address, they will no longer be able to use a PO Box address. If they currently have a PO Box address they should take steps to change this as soon as possible.

Similarly, companies will be under a new obligation to provide a registered email address. It must be expected that emails sent to it by the registrar would come to the attention of a person acting on behalf of the company. Charitable companies already provide a contact email address to the Charity Commission.

Directors should review their existing registered office address (or arrangements if the company does not itself occupy the registered office) to ensure it meets these requirements, as well as putting measures in place to ensure they have a monitored registered email inbox. Together these issues will likely form part of the company’s broader strategic approach to the receipt and timely processing of correspondence and documents.

Powers in relation to inconsistencies in documents filed at Companies House

Companies House will benefit from a new power to refuse to accept and register documents where they are inconsistent with other information held by, or available to, the registrar. This will sit alongside the existing (though slightly amended) power to require companies to provide replacement or additional documents to resolve inconsistencies.

With Companies House’s apparent shift towards active management of the register, companies should be prepared for a possible increase in the scrutiny of filings through the use of these new and expanded powers. Companies House have confirmed the development of “data matching” techniques for this purpose. Directors should take time to review the current state of the register and, if possible, take steps to remedy any issues where necessary; the presence of any incorrect information now may disrupt later legitimate filings should the registrar deem them inconsistent with existing information. Whilst it can currently be difficult to amend any discrepancies in historic filings, any review being undertaken now should certainly cover information relating to the directors, secretary (if any) and persons with significant control.

Annotation of the register

In a further move to promote transparency, the registrar will be able to annotate the register if they consider information misleading or confusing. Directors should consider this change from a reputational standpoint; third parties including lenders and funders may be more hesitant if the registrar has flagged inconsistencies in their filings.

Confirmation of lawful purpose

On incorporation, all companies will be required to confirm that they are forming for a lawful purpose. Confirmation statements will also require companies to confirm that their intended future activities will be lawful. Though this should not represent any significant administrative burden for companies, it does reflect the wholesale nature of the registrar’s clampdown on the abuse of corporate forms.

Companies House fees

From 1 May 2024, Companies House fees will increase to cover costs incurred and expected following the implementation of the Act.

The new fees, and the availability of paper, software and digital filings for each application, can be found here.

Future implementation

Identity verification

One of the most significant changes of the Act will require all directors to verify their identities. This must be done within 14 days of appointment by newly appointed directors, whereas existing directors will be required to comply before the company’s next confirmation statement. Similar provisions will also apply to the company’s PSC’s (people with significant control) if any, though the timescale for compliance is to be confirmed in secondary legislation. Directors will not be permitted to act until they have verified their identity, and a failure to comply may result in criminal sanctions. 

Though the Act provides for the delivery of identity documents to Companies House, further regulations will detail the appropriate documents to submit and procedure to follow. Directors must remain alive to this requirement and consider whether they can take steps to comply with this requirement once implemented. They may, for example, consider setting aside identity documents commonly used in other contexts, and inform those who may be considering taking up office as a director to smooth the transition to this new regime.

Making filings at Companies House

The individuals eligible to make filings on behalf of a company is to be restricted. Once implemented, only the following will be capable of making filings with Companies House:

• Officers or employees of Authorised Corporate Service Providers (ACSPs) (accountants, legal advisors, and company formation agents); and

• Identity-verified employees or directors of the company.

As above, detailed guidance is expected from Companies House, particularly in relation to ACSPs. Though authorised agents already have a duty to carry out due diligence on their clients, the rules in relation to ACSPs will build on this regime; Companies House will expect the same robust approach to company verification whether filings are made directly by those at the company, or indirectly through ACSPs. 

This change has the potential to be disruptive, particularly for companies which need to make filings more regularly. Companies should therefore review their internal administrative procedures or consider seeking the assistance of an ACSP where necessary. 

Abolition of some local registers

Whilst companies are currently required to keep a number of statutory registers, they will no longer be required by law to keep their own:

• Register of directors;

• Register of directors’ residential addresses;

• Register of secretaries; and

• PSC register.

This information will instead be filed directly with Companies House. Some companies may find it useful, or choose for good record-keeping purposes, to retain their own registers. It is imperative, however, that the Companies House register is kept up to date as it will function as the sole statutory register for such information.

If you have any queries as to what changes the Economic Crime and Corporate Transparency Act 2023 will mean for your charity, please contact Hayley Marsden, Mark Beech or any member of our charities and social economy team on 0113 244 6100. You can also keep up to date by following the Wrigleys charities and social economy team on X. The information in this article is necessarily of a general nature.  The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.