Starting on 4 March 2024, the Economic Crime and Corporate Transparency Act 2023 brings in new measures and grants more powers to Companies House (“CH”) with the aim of preventing the creation of, and shutting down, fraudulent companies and extending informational transparency and scrutiny over corporate entities registered in the UK. 

The strengthened powers and stringent identification measures to be enforced by CH will have consequences on how UK entities report information. These are as follows:

Acting as a director or company secretary

CH is set to bring into force a more rigorous procedure and enhanced due diligence for verifying the identity of company officers, including authorised corporate service providers, likely increasing the administrative burden and costs. This means that, beyond going through the new ID process, those acting within this capacity must be registered, with a verified account. 

Failure to accurately identify yourself or acting in this capacity without verification will be considered an offence – incurring potential fines.

It is common for firms to act as company secretary, and in some cases individual partners as directors, on behalf of their clients. However, although providing benefits to the client, the level of exposure and added costs associated may no longer be justifiable to those providing these services.

Filing documents

In practice, in addition to requiring members to undergo this identification process, those acting on behalf of the company – in any capacity – will have to verify their identity before they can file information at CH.

This will likely lead to an increase in the liability firms could incur in instances of inaccurate or erroneous filings.

Increased scrutiny

In addition to the new identification measures, the powers of CH are being strengthened to increase the scrutiny of the information being put on the public register.

These powers will allow CH to further query both new and existing information on the register. Aiming to ensure that it is true and complete, there will be a faster process to remove inaccurate, false, or incomplete information – including anything from share capital figures to the details of directors. For example, anyone setting up a company will be required to confirm that they are forming the company for a lawful purpose. In addition, a company will need to confirm annually on its confirmation statement that its intended future activities are lawful, and companies will require to have an “appropriate address” as their registered office, which means companies will no longer be able to use a PO box as their registered office address.

There will be the opportunity to provide correct or supporting information. However, the potential consequences may prove damaging. Beyond incurring fines, CH will be able to use “annotations” on the public register. These will be used to highlight to anyone relying on the register that there may be false or misleading information supplied by that company. Therefore, there are adherent financial and reputational risks when supplying information.

There will also be stronger checks on company names that may give a false or misleading impression.

The future

The Act is set to introduce many measures over the coming years, only a small number of which have been discussed here. It will be interesting to see the impact they will have. However, it is fair to say that many administrative challenges will lie ahead for corporate entities in the UK. 

CH has promised guidance on each new regulation, which will hopefully moderate any ambiguity. Nevertheless, it will be vital for corporate solicitors, and anyone involved in a corporate entity in the UK, to maintain a working knowledge of the new regulations and enforcement timescales.