The Economic Crime and Corporate Transparency Bill was introduced by the Government as a measure to tackle the increase in money laundering and other financial crime through corporate structures here in the UK. It is estimated that economic crime costs the UK in the region of £100 Billion every year. The Bill is still making its way through Parliament but is expected to become law sometime this summer (2023). The implementation date for the new measures is uncertain as further legislation will be required, together with significant practical and operational changes to Companies House.
The main aim of the reforms is to increase transparency around corporate entities in England and Wales and ensure the information available to the public is accurate and reliable as far as possible. This includes all companies, including charities and not for profit organisations.
The role of Companies House moves from being one of a holder of information provided by companies to that of more active management.
Following implementation of the Bill, Companies House will have increased powers including, to:
- reject or raise queries on data submitted which is inconsistent with that already held;
- require such inconsistencies to be resolved;
- remove information from the records which has previously been accepted; and
- impose financial penalties under the Companies Act 2006.
Companies should be aware of the changes being introduced which will directly affect them. Below are some of the changes which may affect you, there other changes being introduced by the bill which are not covered here.
Perhaps the most significant new measures, are the director and persons with significant control verification provisions, representing a major shift by Companies House to require individual directors and persons with significant control to identify themselves. This new measure is designed to make it difficult to file fraudulent information and hide behind complex corporate structures. It is important to note that this verification extends to those who file information on behalf of others.
Both new and existing directors will be required to undergo identity verification; initially only persons with significant control on new incorporations will be subject to these requirements although it is anticipated that this will be extended in the future.
To support the move towards transparency and accuracy of company information, companies will now be required to note the full names of shareholders, subscribers and members in the statutory registers. In addition, there is an attempt at streamlining company administration as registers of directors, director’s residential addresses, persons with significant control and secretaries will no longer form part of the statutory registers. However, changes will still need to be notified to Companies House and therefore practically it may still be prudent to maintain some form of register to keep track of the changes.
The requirements with regards to registered offices will change. Companies will now be obliged to have a registered office which is ‘appropriate’. In practice this is likely to mean that the address is one to which documents delivered to it would be brought to the attention of someone who is authorised to act on behalf of the company and an acknowledgement of delivery can be obtained. It seems that the use of PO Box addresses may not continue to be appropriate. These rules will apply to all companies, including those who are dormant or do not ‘trade’.
All companies must also maintain an ‘appropriate email address’ for use by Companies House to contact a person acting on behalf of the company, in the same way as the registered office address. This will not be available to the public.
What should companies do to prepare?
It is important to remember at this stage that this legislation is still in Bill form and is subject to change. However, given the importance to the Government it is unlikely that there will be substantial changes, but much will depend on the ability of the relevant agencies to implement the requirements; timing of implementation is still not certain.
Companies at this stage may usefully:
- work through their group structures to ensure transparency of shareholders and directors at all levels;
- prepare directors and others who will be the subject of identity verification;
- take advice from their accountant on what evidence may be required to file accounts;
- consider the new requirements for ‘appropriate’ registered office and email addresses and what may need to be done to satisfy these.
This note is not exhaustive and there are other changes which will be relevant to some companies but not others. Where you have specific queries or concerns, you should take the appropriate professional advice.
How we can help
Please get in touch with our Corporate & Commercial lawyers if you require help with anything raised in this insight.