The Economic Crime and Corporate Transparency Act 2023

The Economic Crime and Corporate Transparency Act 2023 – what do these changes mean for your Company?

Marking the biggest changes to Companies House requirements since its inception in 1844, the Economic Crime and Corporate Transparency Act will be introducing new powers and responsibilities which will affect the interaction and supply of information between a Company and Companies House.

Why are changes being made?

The central aim of the new act is to tackle economic crime and encourage transparency through improvements in the quality of the data available on the Companies House registers. You will also see that in trying to achieve these aims, Companies House is demonstrating its move towards a more robust and modernised digital system. Some of the changes are already in force whereas others will be introduced at different points over the next 18-24 months with the aim for completion in 2027.

Who is affected?

Under the new act, new responsibilities are being put in place for all new and existing company directors, persons with significant control of a company and anyone who files on behalf of your company, such as your accountant or agent. However, these changes aren’t limited to the company form and include limited liability partnerships and limited partnerships, as well as overseas companies.

Initial changes that have been implemented

Greater powers for Companies House:

• Companies House has greater powers to review and challenge information that appears to be incorrect or inconsistent with information already held. This means they are able to remove false information.
• More thorough checks will be made on company names to ensure they do not mislead the public in an attempt to improve the accuracy of information available online.
• Data matching will be used to identify and remove inaccurate information.

A lawful purpose:

When registering or incorporating a company, the subscribers (meaning the individuals setting up the company and who will become the initial shareholders) will need to confirm the company is being formed for a lawful purpose. This will also become part of the annual confirmation statement process, being that a company will need to confirm its intended future activities are lawful.

Registered office address

Going forward, a company must have an ‘appropriate address’ as their registered office. This means that an address must be selected so that any documents sent to it will come to the attention of a person acting on behalf of the company and an acknowledgement of delivery can be recorded. Therefore, a PO Box can no longer be used.

Registered email address

A new requirement is for all companies to provide a valid email address. This information will not be available to the public, but should be one which is monitored to ensure any contact from Companies House is not missed. New companies will need to provide this on incorporation and existing companies will need to provide this on their next confirmation statement.

Enforcement and sanctions

Failure to respond when Companies House make a formal request for further information can have serious consequences, including financial penalties, annotations on the company record and prosecution. These steps may also be taken against a company if there is a failure to provide an appropriate registered office address. Additionally, Companies House has greater powers to share data with law enforcement agencies and government departments where appropriate.

Changes incoming over the next 12-24 months

Identity verification

By autumn 2025, for any new company or LLP, identity verification will become mandatory on incorporation. For existing companies and LLPs, Companies House will provide a window in which identity verification will need to be completed. This will involve providing identity documents to Companies House, and can be verified:

• Directly with Companies House; or
• Through an authorised agent, such as your solicitor or accountant.

Accounts filing

There are some significant changes coming into force that will affect the way that accounts information is filed at Companies House. Over the course of a transition period, your annual accounts must be filed by software only and filing by paper will no longer be an option.

Additionally, changes are anticipated to the filing options for small and micro entity companies. The option to provide abridged accounts will be removed, and all small companies will be required to provide their profit and loss accounts. The aim of this is to both streamline the process and improve the value of information on the register.

Requirements for limited partnerships

By the end of 2026, limited partnerships will need to provide more information, and this information must be filed by an authorised agent registered with Companies House. This additional information includes:

• providing partners’ names, date of birth and usual residential address;
• verifying the identity of general partners;
• providing a registered office within the UK;
• providing a standard industrial classification (SIC) code; and
• filing an annual confirmation statement.

Company registers

Companies will no longer be required to keep their own register of directors, secretaries and PSCs. This means that the filings for your company at Companies House will become the sole source of this information.

Company ownership

To make company ownership more transparent, companies will be required to provide more information about their shareholders including providing a full list so that Companies House can display shareholder information in a way that is easier for users to understand.

Corporate directors

Only UK corporate entities with legal personality will be able to be corporate directors. The directors of these corporate directors must also be natural persons and will be required to verify their identities, similarly to the process described above. These new rules will apply to corporate directors appointed now and in the future. Companies who currently have corporate directors will have 12 months to ensure they are compliant with the new conditions or must resign the corporate director.

Criminal offences

A new offence of ‘failure to prevent fraud’ is created by the new act. This means that a company or partnership can be found liable for fraud where the organisation profits from fraud committed by employees, agents or others acting on their behalf. Whilst the scope of the offence is far-reaching in that all sectors are caught by the offence, including not for profit organisations, the thresholds has been limited so that only large organisations can be found guilty of the offence. Where convicted, an organisation can be liable to pay a fine of an unlimited amount. This offence comes into force on 1 September 2025.

What do you need to do?

Secondary legislation will provide further details on the changes and Companies House will likely publish further information as these changes are implemented. Nevertheless, directors of companies should be considering the steps they will need to take to respond to these changes in readiness for when they do come into force. Some of these include:

• Ensuring your Companies House filings and company registers are up to date;
• Looking into any corporate directors in your company and trying to anticipate whether they will be compliant with the new measures;
• Changing your registered office if it is currently registered at a PO Box address;
• Identifying who may be subject to the new identity verification requirements;
• Reviewing your current practices with regards to filings at Companies House and how your annual accounts information is produced, and consider whether these processes will need to change in order to stay compliant, for example by enlisting the assistance of a solicitor or accountant.

Please call 01242 574244 or contact us if you would like any further information.