The Latest Provisions For Corporate Disclosure & Transparency

Don’t fall foul of the latest provisions coming into force on 4 March 2024

The Economic Crime and Corporate Transparency Act 2023 (Act) received Royal Assent in October 2023. The Act makes some significant changes to UK company law and as part of that gives the Registrar of Companies substantial new powers to drive increased corporate transparency and help prevent criminal abuse of corporate structures.

It is not yet clear when all of the provisions of the Act will come into force – many of them will require the passing of secondary legislation and the roll-out of new infrastructure at Companies House. However, some provisions are already in force, and others are expected to come into force on 4 March 2024.

Here is what you need to know:

Provisions already in force

From 26 December 2023, corporate criminal liability laws for economic crimes were extended to hold corporations liable where an offence is committed by a “senior manager”. Previously, the law required that an offence was committed by “the directing mind and will” of a corporation. “Senior manager” is defined more broadly as an individual who plays a significant role in (a) the making of decisions about how the whole or a substantial part of the activities of the company or LLP are to be managed or organised, or (b) the actual managing or organising of the whole or a substantial part of those activities. No further guidance has so far been issued on who may constitute a “senior manager” but it is likely to cover not just board members but potentially also divisional or regional directors or other senior functions. This will need to be assessed on a case by case basis.

Provisions expected to come into force on 4 March 2024

Confirmation of lawful activities: On incorporation, companies and LLPs will need to confirm that the intended activities of the company are lawful, and this statement must be repeated in each subsequent confirmation statement filed after 4 March 2024.

Registered email address: New and existing companies will be obliged to provide the Registrar with an appropriate email address. This address will not be in the public domain and will be solely for use by the Registrar to communicate with the company. Existing companies can supply the address with the next confirmation statement filed after 4 March 2024.

Appropriate registered office address: Companies and LLPs must have an “appropriate” registered address, which is somewhere that a document addressed to the company, and delivered by hand or by post, would be expected to come to the attention of a person acting on behalf of the company and is capable of being acknowledged and recorded. This means that if you do not control the premises at the registered office address, you should have arrangements in place to deal with documents delivered there, similar to the registered office service we can provide.

New Companies House powers: As mentioned, Companies House has been granted extensive new powers, including powers to check, remove or decline information submitted to, or already on, the Companies House register (for example, to query suspicious appointments or filings, and to reject documents that are not consistent with information held by the Registrar). Where a Companies House query is escalated to a formal query, failure to respond within 14 days will be a criminal offence with potential sanctions including financial penalties and criminal prosecution.

Company names: the Registrar will have power to reject proposed names which wrongly suggest a connection with foreign bodies, include a computer code, or could be used to facilitate the commission of an offence involving dishonesty or deception.

What should you do now?

In anticipation of the 4 March changes, we recommend you do the following:

Registered office address: if you currently use a PO Box as your registered office address, you should identify a new registered office address and notify Companies House before 4 March 2024.

Registered email address: make sure you have set up a registered email address and identify the individual(s) who will be responsible for monitoring it – it may be sensible to set up a generic email address rather than nominating an individual employee, in case they subsequently leave the business. You will need to include this email address in the first confirmation statement you file after 4 March 2024.

In addition, we recommend you carry out a risk assessment to identify your senior managers and ensure (a) that they are briefed on the extension of corporate criminal liability for economic crimes and (b) that you are updating your internal risk management processes to maintain appropriate oversight of senior managers’ activities.

What else is coming down the tracks?

Here are some of the other key changes introduced by the Act, although we do not know when these will come into force:

Failure to prevent fraud: The Act introduces a new strict liability offence which can be committed by an organisation where a specified fraud offence (including offences under the Fraud Act and fraudulent trading) is committed by an employee or agent for the organisation’s benefit. Similar to offences under the Bribery Act, a defence will be available if the organisation can show it had reasonable fraud prevention procedures in place. This offence will only apply to “large organisations”, being those that satisfy two or more of the following conditions in the financial year preceding the year of the offence: (i) it has more than 250 employees: (ii) it has turnover of more than £36 million; and/or (iii) total assets of more than £18 million.

Statement of members: As a one-time requirement, the first confirmation statement filed after a date yet to be appointed must be accompanied by a statement containing the names of each member, and the number of shares of each class held by them.

Statutory Registers: Private companies and LLPs will have to maintain their own register of members and will no longer be able to keep that information on the Companies House central register. The full name of each of their members will be required (rather than just using an initial letter, for example). The obligation to maintain a register of directors, register of directors’ (or members’ in the case of an LLP) residential addresses and a PSC register will be abolished. Instead, these registers will be held centrally at Companies House, and companies and LLPs will be required to ensure that the information is kept up to date.

Annual accounts: reduced filing obligations for micro-entities and small companies are being removed, so that micro-entities will now need to file a balance sheet and profit and loss account (and optionally a directors report), and small companies will no longer be able to file abridged accounts. Companies House has also signalled a move to digital only filing of accounts.

Corporate Directors: The Government will finally bring into force legislation passed in 2015 to restrict the use of corporate directors. These will only be permitted where the corporate director has legal personality and its own directors are natural persons whose identity has been verified (see further below).

Identity Verification

New identity verification requirements are a key part of the Act, but there is likely to be a significant lead time in these coming into force, given the need for Companies House to develop appropriate systems in place to carry out the required checks – this is likely to involve linking an individual to an item of photographic ID. The main changes will be:

Directors: Every existing director of a UK company (or member of an LLP) will need to have their identity verified. Where a new director is appointed, the company will be required to ensure that the director does not act until the verification has been completed. New directors will have to confirm that they are not disqualified directors.

Persons with Significant Control (PSCs): All existing and new PSCs will need to verify their identity. All existing and new relevant legal entities (RLEs) will need to provide the Registrar with the name of a “relevant officer” (a director where the RLE is a company, or member in respect of an LLP) whose identity is verified, and a statement provided by that individual confirming that they are the relevant officer. Going forward, the RLE will need to notify the Registrar of any change in the relevant officer (e.g. if a director resigns) and confirm that the identity of any new relevant officer is verified.

Verification: Verification will be done in two ways: direct verification via Companies House, or verification by an Authorised Corporate Service Provider (ACSP), who is registered with Companies House for the purpose of carrying out these services. ACSPs will be intermediaries such as accountants, lawyers and company formation agents who are registered with a supervisory body (such as the SRA in the case of solicitors) for anti-money laundering purposes. In general, verification will be a one-off process and once a person is verified, they will obtain verified status.

Filings: An individual who delivers documents to the Registrar on their own behalf must have their identity verified. An individual may only deliver documents on behalf of another person if they have had their identity verified, or they are an ACSP (or employee of an ACSP) and the document is accompanied by a statement confirming their verified status and that they have the person’s authority to deliver the document.

Companies House Fee Increases

In order to cover the costs of the expanded services they will be required to provide, Companies House have announced some substantial fee increases that will take effect from 1 May 2024 – further details can be found here.