ECCTA 2023: Progress and what is on the horizon

Companies House has recently published its annual report and accounts for 2023 to 2024 and its business plan for 2024 to 2025. They include some interesting data on the use of its new powers under the Economic Crime and Corporate Transparency Act 2023 ("ECCTA 2023") and an update on when we might expect ID verification to start, as well as information on other changes affecting companies that will be introduced over the next twelve months.

Possible start date for ID verification

As we explained in our articles, The Economic Crime and Corporate Transparency Bill – where are we in August 2023? and The Economic Crime and Corporate Transparency Bill: key points for companies, all directors of companies and Persons with Significant Control ("PSCs") are going to be required to have their identity verified. Given the amount of work, both legislative and technological, needed to get ID verification into operation, the new requirements are not yet in force. However, we now have a better idea of timing as the business plan says that Companies House expects to have introduced the technical capability to verify an individual’s identity by the end of March 2025.

At this stage, the full details of what an individual must do to verify their identity, and how they can do it, have not been finalised but we know that there will be the option of verifying ID through Companies House, using one of their digital options.

Other measures in the ECCTA 2023 are dependent on IDV being implemented – for example, the limited partnership reform we wrote about in this article - so those parts of the ECCTA 2023 cannot come into effect until after then and the limited partnership law reform may not happen until 2026.

Limits on corporate directors

During the coming year, Companies House will start the changes needed to impose limits on the use of corporate directors, subject to certain exemptions, as first set out in the Small Business Enterprise and Employment Act 2015.

As we wrote about here, the ban is likely to have a "principles based" exception allowing a company to have a corporate director (or an LLP to have a corporate member) provided that all the directors of that company are natural persons. Secondary legislation will be needed to implement these changes.

Cleaning up the register

As we explained in our article Economic Crime and Corporate Transparency Act 2023 implementation starts - companies should prepare for 4 March changes , the ECCTA 2023 gave Companies House new objectives to protect the integrity of the information on the register and to try to prevent companies and others from carrying out unlawful activities.

To support this, with effect from 4 March 2024, the ECCTA 2023 gave Companies House wide new powers including powers to query suspicious appointments or filings, request further evidence or reject filings. Companies House has evidently been using its new powers extensively as, since 4 March, it has:

• removed 4,000 registered office addresses;
• removed 2,100 officer addresses and 2,300 PSC addresses;
• redacted 3,600 incorporation documents to remove personal data used without consent;
• removed 1,250 documents from the register, including 800 false mortgage satisfaction filings which would have previously required a court order to remove;
• contacted 3,800 companies with PO Boxes as their registered office address, to make them aware that this would no longer be legally compliant and requiring them to provide an alternative appropriate address.

Companies House has also been changing companies’ registered offices which are not "appropriate" to a default address and it is intending to stop the use of Royal Mail PO Boxes and equivalent services as an appropriate registered office address by the end of March 2025.

More annotations will be made to the register over the next twelve months, flagging inconsistent or incorrect information, making it easier for people using the register to see where Companies House is intervening to query or remove misleading or incorrect information.

More Register of Overseas Entities fines

We can expect to see more fines for breaches of the rules on registering an overseas entity as the owner or holder of a long lease of UK property, more details on which you can find here and here. Companies House will be working with overseas company registers and HM Land Registry to identify those on the Register of Overseas Entities that have failed to comply with their obligations.

Implementing the remaining parts of the ECCTA 2023

At least fifty statutory instruments are likely to be needed to underpin the operational roll-out of the ECCTA 2023, including the Authorised Corporate Service Provider application process and ID verification rules. The annual report says that the Government intends to deliver these instruments in phases, designed to be “closely aligned with the extensive operational transformation within Companies House”.

We will be publishing updates on ECCTA 2023 implementation as and when we have more details and the secondary legislation is published. In the meantime, if you require any further information on how the ECCTA 2023 may affect your business, please contact one of the authors or your usual Brodies contact.