Following on from the Economic Crime (Transparency and Enforcement) Act 2022, the Economic Crime and Corporate Transparency Act 2023 (Act) is the second part of a legislative package aimed at preventing the abuse of UK corporate structures and economic crime by improving the integrity of the information available about companies and other business entities.

The key changes introduced by the Act include:

1. Enhanced powers for the Registrar: the Act will result in a big change to the role of Companies House, turning it from a largely passive recipient of information to a gatekeeper. Under the Act, Companies House will have new powers including the ability to query and reject filings, require additional information to be provided, to remove information from the register more swifty and to proactively share data with regulators and public authorities. It will also be able to require all information to be filed electronically.
2. Identity verification: the Act introduces mandatory identity verification for all directors and persons with significant control (PSCs) (in both cases for existing and newly appointed). Directors and PSCs who do not verify their ID will commit a criminal offence and/or incur a civil penalty. Companies that have an unverified director will also commit an offence.
3. Directors: a person will be prohibited from acting as a director unless their identity has been verified. Provisions around notification of changes of directors have also been tightened and a new offence introduced.
4. Ban on corporate directors: in 2015, the Government legislated to ban the use of corporate directors, but these provisions were not brought into force. The Act will implement the ban on corporate directors, but with a ‘principles’ based exemption.
5. Filing information at Companies House: the Act introduces new requirements in relation to how corporate entities interact with and submit information to Companies House. At present, certain documents to be delivered to Companies House must be signed by specific persons, but anyone is able to deliver the documents to Companies House. The Act restricts the ability of those who can file information at Companies House on behalf of corporate entities to ID-verified individuals and authorised corporate service providers.
6. Registered office and email address: the Act introduces a new requirement to ensure that a registered office is an “appropriate address” and also requires all companies to have a registered email address.
7. Company registers: the Act abolishes the requirement for companies to keep their own register of directors, secretaries and PSCs. This means that the public will rely instead on filings at Companies House which will become the single, verified source of information for such information.
8. Company names: the Act expands the circumstances in which the use of a company name can be prohibited to include, for example, names that could be used to facilitate crime.
9. Register of overseas entities: the definition of “registered overseas entity” will be amended such that if an overseas entity fails to respond to any requests for information from the Registrar it would be unable to make a disposition of UK real estate assets.
10. New criminal offences: the Act introduces a new criminal offence of “failure to prevent fraud” which will make companies and partnerships liable for failing to stop employees, agents or others acting on their behalf, committing fraud for the benefit of the organisation or its customers. The offence applies only to large companies (as defined in the Companies Act 2006), being those meeting two of the following criteria: (i) more than 250 employees; (ii) more than £36 million turnover and (iii) more than £18 million total assets. The Act also changes the basis on which liability is attributed to corporates for economic crimes so that the involvement of a “senior manager” will suffice to convict the company.
11. Limited partnerships: the Act introduces registration and transparency requirements for limited partnership legislation aimed at tackling the misuse of limited partnerships through greater transparency.

Although the Act received Royal Assent on 26 October 2023 and is now law, the changes will not take effect immediately; rather they will be rolled out over the coming year (or more) through a series of commencement orders under a government implementation timetable.

We have little detail on the specific timetable at this stage, however, in a blog post on the Act receiving Royal Assent, Companies House noted that, whilst some of the measures in the Act will need processes to be developed and secondary legislation before they can be brought into force, other measures can be brought into force sooner; these measures include: (i) the power for Companies House to query or reject information filed with it; (ii) revisions to the company names regime; and (iii) the requirement for companies to provide the registrar with an email address. It is anticipated that these measures will come into force in “early 2024”.

We will be releasing a series of updates over the coming weeks and months exploring the changes that the Act introduces in more detail, and explaining what it means for your business. In the meantime, if you have any questions, please reach out to your usual contact at Lewis Silkin.