What you need to know about the Economic Crime and Corporate Transparency Act
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What you need to know about the Economic Crime and Corporate Transparency Act
What are the aims of the Act?
The Economic Crime and Corporate Transparency Bill has made its way through Parliament and received Royal Assent on 26 October 2023. Some of its provisions are in force already; others will come into force shortly, as in some key areas secondary legislation and governmental guidance are required.
The Act has a number of objectives (including in relation to crypto-assets, national security measures, limited partnerships, creating a new corporate offence in relation to failure to prevent fraud and also taking action in relation to strategic lawsuits against public participation, commonly known as SLAPPS). For the purposes of this blog, however, we are looking at the day-to-day impact on companies, their directors and persons with significant control (PSCs) of some of the changes to be introduced.
In addition to taking strong steps against terrorists and criminals for the purposes of money laundering and fraud, the Act aims to combat the abuse of corporate formations, and includes the following measures:
- implementing provisions to prevent economic crime and enhance corporate transparency;
- providing the Registrar of Companies (Companies House) with enhanced investigative and enforcement capabilities, including the ability to validate information with public and private sector organisations and to share data with law enforcement agencies;
- widening powers conferred on the Registrar of Companies to ensure that reliable data is contained in companies’ registers; and
- compulsory identity verification for all newly-appointed and current registered directors, those exercising substantial control, and any individual or entity presenting documentation to Companies House.
What are the changes to the current Companies House system?
There are various significant changes with which directors and governance professionals will need to familiarise themselves:
Enhanced powers for the Registrar of Companies (s79 – s87)
The Act grants Companies House with extensive powers to require further information to be provided, to query and reject filings, and to proactively share data with regulators and public authorities when required.
The Act also requires all information and documentation in relation to companies to be filed electronically.
Changes to company statutory registers (s51)
A company’s register of members must contain the full names and addresses of each member, as abbreviations won’t be allowed. Companies will no longer be permitted to elect to keep membership information on a central register and all companies will need to maintain their own registers of members.
Companies will no longer be required to keep their own registers of directors, secretaries and PSCs. Filings at Companies House are expected to become the single, verified source of information in these areas.
Identity verification (s64 – s69)
The Act brings in a requirement for new and existing company directors and PSCs to verify their identity. This is designed to provide as much transparency as possible in the information contained on a company’s register at Companies House.
No-one will be permitted to deliver documents to the Companies House on someone else’s behalf without having been verified by the Registrar of Companies.
Two different processes will be put in place by which individuals will be able to verify their identity: either directly via Companies House or through an authorised corporate service provider. Generally, we’re expecting that verification will be a one-off requirement (unless, for example, a person changes their name).
Company names restrictions (s8 – s22)
Further restrictions on the names that companies can use will be introduced in order to prevent (for example) names being used for the purposes of crime, or names containing computer code.
Registered office and email address (s88A)
The registered office used must be an “appropriate address” (in essence somewhere where documents are likely to be received by someone representing the company – as opposed to “brass plate” addresses) and all companies must have a registered email address at which they can be contacted – this must be kept up to date at Companies House.
How can we help?
All incorporated businesses are likely to be affected by the new rules and it is going to be key for directors and compliance professionals to be aware of their obligations. We understand that Companies House will not notify directors of their obligations: directors are expected to be aware of them. Rix & Kay can help you: if you would like to discuss these changes and how they will affect your business operations, please get in touch with a member of the Corporate and Commercial team.
