Identifying Implications for Businesses: Economic Crime and Corporate Transparency Act 2023

The legislation generally affects all entities registered with Companies House (including companies, limited liability partnerships (LLPs) and other entities) with the aim of increasing corporate transparency and tackling economic crime.

Whilst the ECCTA was passed on 26 October 2023, it is important to note that the reforms are likely to take several years to be fully implemented and are expected to come into force in stages.

On 4 March 2024 several significant changes were implemented.

Key changes from 4 March 2024: Practical Implications

Registered email address:

There is a new requirement for companies and other entities to provide an appropriate registered email address.

This will be used by Companies House for any official communication and will not be available for public inspection.

An email address will be “appropriate” if an email sent by Companies House would be expected to come to the attention of a person acting on behalf of the company.

What this means for you?

If you have an existing company, you must give an appropriate registered email address when filing the next confirmation statement with a start date after 4 March 2024.

If you are setting up a new company after 4 March 2024 you must give an appropriate registered email address in the incorporation form.

Registered office address

There is a new requirement for the registered office address of companies and other entities to be an ‘appropriate address’.

An address is an “appropriate address” if in the ordinary course of events:

• a document addressed to the company, and delivered there by hand or by post, would be expected to come to the attention of a person acting on behalf of the company, and
• the delivery of documents there is capable of being recorded by the obtaining of an acknowledgement of delivery.

What this means for you?

As a consequence of this change, companies can no longer use a PO box as their registered office address.  

Important note: if Companies House is not satisfied that the registered office address is appropriate, they will change the address to the default held at Companies House. Companies must then provide an appropriate address within 28 days. Failing to do so may result in Companies House commencing the process to strike-off the company.

Stronger Checks on Company Names

Companies House now has the power to reject or question company names. Companies House may query the name at the incorporation stage or post-incorporation.

What this means for you?

Companies should ensure compliance with statutory requirements on company names and respond to any formal queries from Companies House within the appropriate timeframe.

Statement of Lawful Purpose

Companies and other entities will need to confirm they are being formed for a lawful purpose and that future activities will be lawful.

What this means for you?

Existing companies will need to confirm that future activities will be lawful in each annual confirmation statement dated after 4 March 2024.

If you are setting up a company after 4 March 2024 you must confirm it is being formed for a lawful purpose in the incorporation form. As with existing companies, you will also need to confirm that future activities will be lawful every year in the annual confirmation statement.

Accuracy of information on the register

The registrar has increased powers to challenge and amend incorrect or inconsistent information.

What this means for you?

As a mitigating step, companies should check that all information held on the filing history at Companies House is accurate and up to date.

Fee increase: from 1 May 2024

As a result of the increased powers and consequent increased expenditure, the fees for various Companies House services are increasing from 1 May 2024. Please see further: https://changestoukcompanylaw.campaign.gov.uk/changes-to-companies-house-fees/

Sanctions for non-compliance

There are serious consequences if a formal request from Companies House to provide further information is not responded to.

Consequences may include:

• a financial penalty
• an annotation on the company register
• prosecution

Please note: as mentioned above, there are additional strict consequences for failing to provide an appropriate registered address

Next stage reforms

There are several reforms that have been planned and detailed to some extent, but not yet implemented. This includes the following:

1. Identity Verification:
There will be new identity verification requirements for companies and other entities.

• All directors and PSCs (or all members for LLPs) will have to verify their identity.
• Anyone who submits filings on behalf of a company will also have to verify their identity before filing.Note: shareholders (who are not PSCs or directors of the company) will not have to verify their identity. However, a one-off full list of company shareholders (who hold at least 5% of shares) will have to be listed in the incorporation form once the above process comes into force.
  Timeline: a date has not yet been set for implementation of this change.

2. Accounting changes: there will be various accounting changes including a transition to filing accounts by software only and the option to file ‘abridged’ accounts will be removed.
Timeline: a date has also not been confirmed, although the software only filing is expected to be rolled out over the next 2-3 years.

3. Protection of personal information: additional information may be suppressed at Companies House such as residential addresses and signatures on historical documents.
Timeline: these measures will come into force over next 2 years.

4. Ban on corporate directors: there will be a general prohibition on corporate directors subject to exception.
Timeline: a date has not yet been set for implementation of this change.

5. Statutory registers: the following internal registers will be abolished: register of directors, directors’ residential addresses, register of secretaries and PSC register. The only remaining internal register to be kept by companies will be the register of members.
Timeline: a date has not yet been set for implementation of this change.

If you want more information on any of the above, or indeed any matters relating to your business, please get in touch with Varishma Assani, Corporate Solicitor at Streathers