The Economic Crime and Corporate Transparency Act 2023 received Royal Assent in October 2023. The Act introduces measures to improve corporate transparency and tackle economic crime which will require action by companies of all sizes.
The measures include identity verification requirements for all directors, PSCs and those delivering documents to Companies House. They also include further changes impacting directors, as well as significant reform of the role and powers of Companies House and filing processes. The Act also introduces a new corporate offence of failure to prevent fraud, and tightened registration and transparency requirements for limited partnerships.
The provisions of the Act will not come into force straight away. This is so that Companies House can develop its internal systems, and companies have time to prepare. It is anticipated that implementation will take effect in stages over the next 12 to 24 months, although it is expected that some reforms will take effect in early 2024.
Directors, PSCs and those filing documents at Companies House will all need to have their identity verified. There will be two routes:
The ASCP is a new role for intermediaries such as lawyers, accountants and company formation agents who are registered with a supervisory body for anti-money laundering purposes and have an existing obligation to carry out due diligence checks on clients.
Identity verification will usually be a one-off requirement, but re-verification may be required, for example, where the Registrar doubts validity on suspicion of fraud.
An individual will not be permitted to act as a director unless their identity has been verified. This will apply to:
UK companies will have to ensure that an individual does not act as a director unless their identity has been verified. A director should not take any actions on behalf of the company in their capacity as a director until that verification has been done. Breach will be punishable with fines, although the validity of acts done by an individual as a director will not be affected.
In addition to the identity verification requirement, it will be an offence for a new director to act if their appointment is not filed with the Registrar within 14 days of appointment. Directors would be well advised to check the filing has been made by the company.
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.
Anyone delivering documents to Companies House will need to have their identity verified first unless they are an employee or officer of an ACSP or subject to an exception. Even an individual delivering on their own behalf must have their own identify verified first.
There are new controls over who can make filings on someone else's behalf, to ensure those persons are verified and supervised under money laundering legislation:
The Registrar will have enhanced powers to scrutinise, reject and, in some cases, remove information that seems incorrect or inconsistent with that which is already on the register. The greater powers to query information are expected to take effect in early 2024. The Registrar also will be able to require all information to be filed electronically.
There will be greater liability for false statements. The offence for filing a materially misleading, false or deceptive document has been widened in scope, with the current threshold of 'knowingly or recklessly' lowered to 'without a reasonable excuse'. Liability can also extend to officers of the company or firm.
A company’s registered office will need to be at an 'appropriate' address’ at all times, and an 'appropriate' email address will need to be supplied to Companies House. This change is expected to take effect in early 2024.
An 'appropriate' address or email address is one where post or emails sent to it will come to the attention of someone acting on behalf of the company and, in the case of postal addresses, where an acknowledgement of delivery can be obtained. PO boxes will not be permitted. Postal addresses will be made public, whereas email addresses will not. Documents may be validly sent by the Registrar to the email address given.
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.
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 supply this information to the company, and changes must be notified, 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.
Companies will not be able to register a transfer of shares unless satisfied that they have the required membership information.
The filing of company accounts is moving to software only, in phases over the next two to three years. As part of improving the financial information on the register, the accounts filing options for small companies and micro-entities are also being streamlined:
Companies relying on audit exemption will need to include a directors' statement confirming the basis for the relevant exemption.
Separate provisions to restrict the use of corporate directors are expected to come into effect in parallel with the Act (proposed legislation awaited). It is anticipated that corporate directors will be permitted only where all of its directors are natural persons and have had their identities verified. Therefore, a company will only be able to have one "layer" of corporate director. It is expected that, once the legislation comes into force, companies with corporate directors will have 12 months to comply.
The requirement will also apply to overseas corporate directors of UK companies, who likely will need to provide evidence to the Registrar that it has only natural persons as its directors, all of whom have had their identities verified.
LPs will need to file more detailed information about their partners as well as annual confirmation statements.
The general partners of an LP will have a duty 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 general partner or an address provided by an ACSP. General partners must also maintain an appropriate email address for the LP.
The Act introduces a new failure to prevent fraud offence which will apply to all large organisations, i.e. any organisation which meets two out of three of the following criteria: over 250 employees, turnover of over £36 million and assets of over £18 million. It also widens corporate criminal liability for economic crimes committed by senior managers. See our Corporate crime briefing for further detail.
While a full implementation timetable is not yet available, and we still await transitional measures, companies may wish to start preparing for these changes. Some key issues will need action, especially preparation for identity checks. Please speak to us for guidance on preparing for these changes.
作者 Emma Allen