The Economic Crime and Corporate Transparency Act 2023 introduces significant reforms to Companies House which will impact all companies and their directors. Implementation of the changes is taking effect in stages. Companies House has published an outline transition plan indicating when we can expect a number of these reforms to take effect over the next two years.
Some of the most significant Companies House reforms which are yet to be implemented are outlined below. Where Companies House has given an indication of timing, this also has been included.
New identity verification (IDV) requirements
New IDV requirements will apply to all new and existing directors, persons with significant control (PSCs), relevant officers of relevant legal entities (RLEs), and those filing documents at Companies House.
There will be two routes for IDV, either directly with Companies House, or indirectly through an authorised corporate service provider (ACSP).
UK intermediaries (eg lawyers, accountants and company formation agents) which are subject to the UK's anti-money laundering regime can apply to Companies House for authorisation to act as an ACSP. Companies House anticipates starting the ACSP authorisation process by spring 2025.
Companies House also expects individuals to be able to complete IDV voluntarily by spring 2025.
IDV will usually be a one-off requirement, but re-verification may be required, eg, where the Registrar doubts validity on suspicion of fraud.
Details of the IDV process will be set out in separate regulations and Registrar's rules, drafts of which have been published but are not yet in force.
IDV – directors, PSCs and RLEs
An individual will not be permitted to act as a director unless their identity has been verified. To do so will be an offence committed by the individual and the company (and its directors). The offence will be punishable by a fine, and the individuals involved may also be subject to disqualification. However, the validity of acts done by that director will not be affected.
The new IDV requirements will apply to all new and existing directors of UK companies, and directors of registered overseas companies with a UK establishment.
In addition, it will be an offence for a new director to act if their appointment is not filed at Companies House within 14 days. This offence will be punishable by a fine, but the validity of the appointment, and any acts done by that director, will not be affected.
PSCs and a relevant officer of a RLE must also have their identity verified once they become a registrable PSC or RLE, even if overseas. PSCs on incorporation must not be disqualified as directors. RLEs must maintain the verified status of their registered officer while the RLE is registered with the Registrar.
By autumn 2025, Companies House expects IDV to be a compulsory part of incorporation, and for new directors and PSCs. This will also be the start of a 12-month transition period requiring IDV for existing directors and PSCs as part of the annual confirmation statement filing process.
Restrictions on filings at Companies House
An individual filing on their own behalf must have their own identify verified first unless an exemption applies.
An individual will be able to file on behalf of another individual if their identity has been verified, or they are an ACSP or an employee or officer of an ACSP.
Individuals can only file on behalf of a company if they are an officer or employee of the company to which the filing relates and they have had their identity verified, or they are an ACSP or an employee or officer of an ACSP.
Consideration will need to be given to filing processes where a centralised legal or company secretarial function files on behalf of multiple group companies. In this scenario, the individual making the filings may not be an employee or officer of the company to which the filing relates and therefore may not fall within scope of those individuals permitted to make such filing.
Companies House expects IDV to be compulsory for anyone filing a document with the Registrar by spring 2026.
New Companies House enforcement and financial powers
Companies House is now able to impose a civil financial penalty as an alternative to criminal proceedings for most offences under the Companies Act 2006. This includes late filings in relation to confirmation statements, returns on allotment of shares and notices of directors' appointments. Companies House expects to begin issuing these financial penalties during autumn 2024.
Company accounts
Companies House will require all accounts to be delivered to it online. This reform will take place following an extensive formal notice period (timeframe not yet available).
The accounts filing options for small companies and micro-entities are also being streamlined:
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Micro entities will need to file their annual accounts (including a profit and loss account) and (unless exempt from audit) auditors' report.
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Small companies will need to file their annual accounts, directors' report and (unless exempt from audit) auditors' report.
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Companies relying on audit exemption will need to include a directors' statement confirming the basis for the relevant exemption.
Corporate directors
Restrictions on the use of corporate directors are expected to come into effect in parallel with the Act (proposed legislation awaited).
Corporate directors will be permitted only where all of its directors are natural persons and have had their identities verified. Only UK corporate entities with legal personality will be able to act as a corporate director, and overseas companies will not be permitted to act as corporate directors in the UK.
Some company registers repealed
Companies will no longer be required to hold their own PSC register, register of directors, register of directors' residential addresses or register of secretaries. The information will still need to be filed at Companies House.
Register of members
Companies must maintain their own register of members, comprising name and service address. Private companies will no longer have the option to keep information about their members on the central register.
New members must provide the company with this information within two months of becoming a member, and any changes to this information must be notified to the company, again, within a two-month period. Companies can also give notice requiring this information within one month.
It will be an offence to fail to comply with any of these requirements, or to provide information that is materially misleading, false or deceptive either without reasonable excuse or knowing that it is false.
Limited partnerships
LPs will need to file more detailed information about their partners as well as annual confirmation statements.
The general partners (GPs) of an LP will have to ensure that the LP's registered office is at an 'appropriate address' and in the part of the UK in which the LP is registered. The address must be either the principal place of business, the usual residential address or registered office of a GP or an address provided by an ACSP. GPs must also maintain an appropriate email address for the LP.
Reforms to LPs will take place no sooner than spring 2026.
Next steps
While a full implementation timetable for the Act is not yet available, the Companies House outline transition plan is a useful indication of when some of the biggest changes may take effect. However, Companies House notes that timelines will be kept under review.
That said, companies may wish to start preparing for these changes ahead of time, including identifying which individuals will fall within the scope of the new IDV requirements, reviewing corporate filing procedures and checking whether any corporate directors need replacing.
In addition, companies would be well advised to keep on top of their legal obligations under the Companies Act 2006 ahead of Companies House beginning to apply its enhanced powers to issue financial penalties for breach.
Please speak to us for guidance on preparing for these changes.
