As we wrote in our article in November 2023, the Economic Crime and Corporate Transparency Act 2023 ("ECCTA") finally received Royal Assent in October 2023, after months of legislative scrutiny. As we discussed in that article and in our previous articles in August 2023 and November 2022, the main aims of the legislation are to reduce the use of companies in economic crime and improve the levels of transparency and reliability of information publicly available from Companies House.
The implementation process has started, with a few of the economic crime provisions of the ECCTA now in force, none of which affect company law. The detailed provisions implementing the ECCTA will be contained in secondary legislation; the statutory instruments are subject to the affirmative procedure, meaning they will be laid before Parliament and require the active approval of both the Houses of Commons and Lords to come into effect.
The Government has set up a webpage which has useful practical information on certain key aspects of the ECCTA affecting company law.
Provisions coming into effect on 4th March 2024
The Registrar of Companies, Louise Smyth, has indicated that certain provisions of the ECCTA which impact corporates will be brought into force in March 2024. Although the draft regulations bringing these into effect have not, at time of writing, been published, the following provisions are currently due to come into force on 4th March, subject to any slippage:
- The requirement for every company to provide Companies House with a registered email address: see below;
- Lawful purposes confirmation on incorporation and in annual confirmation statement: see below.
- 'Appropriate' registered office address rules: every company will be required to have a registered office address that is 'appropriate', meaning, essentially, somewhere that post will be received by a person who will deal with it. No company will be allowed a PO Box address. Companies House is being given new powers to change a company's registered office which is not considered to be 'appropriate' to a default address.
- Greater powers for Companies House to query information: Companies House will be given more powers to reject or query information filed at Companies House which it believes may be suspicious, fraudulent or in some other way damaging. It will also have powers to compel a person to provide information so it can make a determination about the queried filing.
- Annotations on the register to flag potential issues with the information supplied to Companies House: where Companies House has queried information supplied to it but hasn't received any satisfactory response, it will be able to flag that information on the public register. You may start to see annotations on the register if you are doing company searches on, for example, creditors, customers or suppliers.
Requirement to provide a registered email address
As stated above, from 4th March (or a later date, if there is slippage), every company will be required to provide Companies House with a registered email address. Companies incorporating on or after that date will be required to supply an email address on incorporation and existing companies will need to provide it in their first confirmation statement due after 4th March 2024.
Companies House has given guidance on this requirement, clarifying some of the areas of interest or concern, from which we understand that:
- The registered email address will not go on the public register and is solely a means for Companies House to communicate with companies. The registered email address will not be used for service of notices by third parties or for others to contact a company instead of the company's registered office or service address.
- More than one company can use the same email address; a group of companies could decide, therefore, to use the same email address for each company in the group if this was more convenient or efficient.
- If the same email is registered for more than one company in a group and Companies House makes contact about a specific company, then that company will be clearly identified in the Companies House email. If the purpose of the Companies House email is a general update, such as changes to legislation that affects all companies, then the communication won't refer to the specific group company.
- Although it is not mandatory, Companies House is recommending that it is best practice to send responses to them from the registered email address.
- In order to change the registered email, there will be a new ‘update a registered email address’ service. Users with authorisation to file on behalf of a group company will be able to view the latest email address registered in their WebFiling company profile and on the confirmation statement, both of which will offer links to the service where it can be changed. The filer updating the email address will receive a notification that the filing has been received, registered or rejected.
Action to take now
- Companies should start to decide which email address they will supply to Companies House.
- If there is a group of companies, consider whether all or some of the companies in the group will use the same registered email address.
'Lawful purposes' statement and annual confirmation
A key aim of the ECCTA is to stop companies and other entities being used by criminals for illegal purposes and, to this end, a new 'lawful purpose' statement and annual confirmation is being introduced.
From 4th March 2024, or a later date if timing slips, on incorporation, the subscribers will have to confirm that the company is being incorporated for a 'lawful purpose'.
Existing companies will have to confirm annually, in their confirmation statement, that their intended future activities are lawful. This is most likely to be a simple 'check box' requirement on the confirmation statement and should not be an onerous requirement but is worth noting from a process aspect and for those signing off the confirmation statements for a company.
Action to take
- Ensure that any company with a confirmation statement due in March is ready to give the 'lawful purpose' statement and has reflected this in the process for approving their confirmation statement.
- As subscribers to a company, be aware that you will be giving a 'lawful purpose' statement on incorporation.
Application to limited partnerships and limited liability partnerships
Registered email address: Limited liability partnerships ("LLPs") and limited partnerships, including Scottish limited partnerships, ("LPs"), are also going to have to provide Companies House with a registered email address but, at this point, it doesn't appear that this requirement is going to come into effect for them on 4th March.
Lawful purpose: At this stage, it seems that only LLPs will be required to give the 'lawful purpose' statement initially and annually; we don't know at this point when the new requirements will start to apply to LLPs. At the time of writing, there seems to be no requirement for LPs to give any 'lawful purpose' statement either when they are created or annually.
For any further information on how these requirements apply to your business or on the wider implications of the ECCTA, please contact the authors or your usual Brodies contact.