The United Kingdom’s corporate governance landscape has undergone significant transformations in recent years, aiming to enhance transparency, accountability, and adaptability within its business environment. These changes impact various facets of company ownership and directorship, including shareholder verification, director appointments, and the delineation of
Introduction to the Economic Crime and Corporate Transparency Act 2023
The Economic Crime and Corporate Transparency Act 2023, which received Royal Assent on 26 October 2023, marks a pivotal shift in the UK’s approach to corporate regulation. This legislation empowers Companies House with enhanced authority to scrutinize company information, enforce compliance, and collaborate with law enforcement agencies. The Act introduces several measures aimed at improving the accuracy and transparency of company ownership and directorship records
Key Reforms Under the ECCTA
- Registered Office Address Requirements
From March 4, 2024, all companies must use an “appropriate address” as their registered office. An appropriate address is one where any documents sent are expected to come to the attention of someone acting on behalf of the company and are recorded by an acknowledgement of delivery. Companies currently using a PO Box as their registered office address must change it by this date to avoid potential removal from the register
- Mandatory Identity Verification
All company directors, Persons of Significant Control (PSCs), and individuals filing on behalf of a company must undergo identity verification. This measure aims to prevent the use of false identities in company registrations
- Enhanced Role of Companies House
Companies House will gain powers to actively query, challenge, or reject information that appears incorrect or inconsistent with existing records. It can also remove information known to be inaccurate, incomplete, false, or fraudulent. Additionally, Companies House will conduct more comprehensive checks on company names to prevent misuse and use annotations on the public register to highlight potential issues.
- Abolition of Certain Statutory Registers
The requirement for companies to maintain internal registers of directors, directors’ residential addresses, secretaries, and PSCs has been abolished. This information must now be filed directly with Companies House and maintained on a central public record
- Changes to Limited Partnerships
LPs will be required to provide detailed information about each partner, verify the identity of general partners, maintain a UK-registered office address, provide a Standard Industrial Classification (SIC) code, file an annual confirmation statement, and provide a registered email address. Scottish Limited Partnerships (SLPs) will also be subject to these requirements.
- Transition to Software-Only Filing for Annual Accounts
Companies House is moving towards a software-only filing system for annual accounts. This transition aims to improve efficiency and data accuracy. Companies will need to adopt approved accounting software to comply with this new filing method. Additionally, small and micro-entity companies will be required to file profit and loss accounts, and small companies that do not qualify as micro-entities must file a directors’ report. The option to file abridged accounts will be removed, and companies claiming audit exemption must include a statement by the directors on the balance sheet.
- Ban on Corporate Directors
The new legislation imposes restrictions on the appointment of corporate directors. Only corporate directors that are UK entities with a legal personality are permitted. Furthermore, all directors of these entities must be individuals who have undergone identity verification with Companies House. This measure aims to prevent the use of corporate structures to conceal the identities of individuals controlling companies.
Companies currently utilising corporate directors who do not meet the new requirements have a 12-month grace period to comply. During this period, companies must ensure that their corporate directors meet the identity verification and legal personality criteria. Failure to do so may result in non-compliance and potential penalties
Conclusion
These reforms represent a significant shift towards greater transparency and accountability in UK company operations. Companies are advised to review and update their practices to ensure compliance with the new legal requirements. Failure to comply with these regulations can result in penalties, including fines and potential removal from the company register.
For more detailed information and guidance on these changes, contact us now.
