The Economic Crime and Corporate Transparency Act 2023 (“ECCTA”) began to come into effect in England and Wales from the 4th May 2024. The aim of the ECCTA is to prevent abuse of UK businesses and tackle economic crime. It is specifically reforming the role of Companies House from simply a recipient of information to an active gatekeeper. These improvements reflect a growing understanding of wider concerns regarding economic crime and issues surrounding corporate transparency.
Important changes to consider
A major reformative element of the ECCTA and the application of its key objectives centre around data requirements and storage at Companies House. For example:
- The ECCTA has implemented a duty to notify Companies House of any changes to directors and secretaries, within 14 days of date on which they become or cease to be a director or secretary.
- This will include statements to outline that the director is not disqualified or otherwise ineligible to be a director, that each director has consented to act, changes to both director and secretaries required personal information and the date on which they became or ceased to be a director and/or secretary.
- All existing and new directors must also have their identity verified before they can act; an obligation will be placed on the company to ensure that an individual does not act as a director unless their identity is verified (see below for more information).
- All companies must maintain an appropriate email address and inform Companies House of this on incorporation and/or in their confirmation statements.
- The requirement for a company to maintain its own PSC register has been abolished – this information will only be held by Companies House but, similarly to directors, PSC’s information must also be verified. Directors and PSCs who do not verify their identity will commit a criminal offence and/or incur a civil penalty. Companies who have an unverified director will also commit an offence.
- A company may verify the identity of their directors and PSC’s by using an Authorised Corporate Service Provider (ACSP). An ACSP is a third-party agent which presents filings to Companies House, or verifies directors and PSC’s identity, such as accountants or solicitors. At Nockolds, we frequently assist our clients in filing information and verifying information at Companies House.
- Importantly, Companies House will be able to request additional information, query, or reject filings altogether. This is a new provision within the Companies Act, inserted by the ECCTA, which highlights Companies House’s role in information storage and active monitoring.
These changes are aligned with the regulatory shift towards abolishing further administrative hurdles for companies, with the intention of reducing compliance burdens, improving the quality of information, and simplifying the constitution of information on the register.
Offences Created
The ECCTA has created a number of new offences to enforce the developing framework that aims to prevent the abuse of UK businesses and tackle economic crime. Some notable examples of these offences are listed below:
False statement
- It will be an offence for a person to deliver a filing or statement that is false, deceptive or misleading, “without reasonable excuse”.
- It is a criminal offence to knowingly commit a false statement offence.
- When the offence is committed by a firm, every officer of the firm who is in default also commits the offence. The penalty is up to 2 years imprisonment, a fine, or both.
Failure to prevent fraud
This offence can only be committed by “large organisations” which are defined as corporates (including charities and incorporated public bodies) and partnerships that meet any 2 of the following 3 criteria in the year that proceeds the year of the fraud offence:
- More than 250 employees;
- More than £36 million turnover; and
- More than £18 million in total assets.
Overall, it’s clear that the ECCTA is a positive step towards protecting UK businesses. While this legislation does impose more duties regarding data transparency, (particularly surrounding officers and PSCs) they offer protections from abuse and other economic crimes for businesses. Nockolds can assist in this regard by acting as your business’ ACSP and remove the burden on you to verify the requisite information yourself. We can also provide broader company law advice and ensure full compliance with the requirements prescribed in the ECCTA.
For more information please contact our Corporate and Commercial department on 0345 646 0406 or fill in our online enquiry form and a member of the team will be in touch.