Company law reform to tackle fraud – how does this affect your business?
New laws to combat economic crime are now up and running, with consequential major changes at Companies House.
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) received Royal Assent on 26 October 2023, but its provisions are being phased in over several years. The first major changes came into force on 4 March 2024 and further changes are set out below.
One of its key aims is to transform Companies House into a more active guardian of company creation and improve the accuracy and quality of data filed with the Registrar of Companies, with hefty fines for non-compliance.
This gives Companies House considerable powers.
What are the key measures companies need to know about?
The changes, the most comprehensive in Companies House’s 180-year history, are designed to crack down on the growing number of criminals who have misused UK companies to commit fraud, money laundering and other offences.
The measures already now in force include:
- New rules for registered office addresses – A PO Box will no longer suffice, an appropriate physical office address must always be used.
- Registered email addresses a requirement for all companies.
- A new obligation to confirm both on incorporation and reconfirmed annually that a company’s activities are lawful.
Companies House CEO, Louise Smyth, states: “As we start to crack down on abuse of the register, we are prioritising cases where people’s names and addresses have been used without their consent. It will now be much easier and quicker to report and remove personal information that has been misused.”
The Companies House Registrar now has the power to impose a direct maximum penalty of £10,000, as an alternative to a criminal prosecution, if satisfied that an offence under the Companies Act 2006 has been committed.
They can also strike off companies more quickly, for instance, if they supply false or misleading information and annotate the register in a wider range of circumstances. This could include if there has been a failure to notify the registrar when a director is disqualified.
Companies House has also increased its fees for incorporation, registration and filing.
What other changes are in the pipeline?
The new powers and requirements are being rolled out phase by phase in a bid to make it as easy as possible for legitimate businesses. The timetable includes:
- Spring 2025: Anti-money laundering supervised firms and sole traders can apply to become authorised corporate service providers (ACSPs) enabling them to carry out identity verification (IDV) services. Individual voluntary identity verification is possible and in certain cases, applications to keep residential addresses out of the public domain will be possible.
- Summer 2025: Access on request to certain trust information on the Register of Overseas Entities will be allowed.
- Autumn 2025: Identity verification will be compulsory for new directors and new people with significant control (PSCs). The 12-month transition period for all existing directors and PSCs to verify their identity also begins.
- 1 September 2025: A new failure to prevent fraud (FTPF) offence comes in. Large companies, not-for-profit organisations and incorporated public bodies (deemed ‘large’ if they meet two or more of the following criteria: more than 250 employers, a turnover of £36 million-plus or more than £18 million in total assets) may be held criminally responsible if an employee, agent, subsidiary or other ‘associated person’ commits a fraud intending to benefit the organisation. This could be anything from dishonest selling to improper practices in financial markets.
- Spring 2026: Anyone filing information at Companies House must have their identity verified and third-party agents filing on behalf of a company will need to be registered as ACSPs.
What should companies do next?
It is important to stay on top of the changes brought in by the evolving ECCTA to ensure compliance and mitigate risk.
Solicitor Kinga Michnowska is part of our highly experienced Corporate Team and can guide you through any changes relevant to you and your business.
Get in touch
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Please contact Kinga for help and information about the Economic Crime and Corporate Transparency Act 2023.
Phone Kinga: 0117 929 2811
Email Kinga: kinga.michnowska@wards.uk.com