The Economic Crime and Corporate Transparency Bill received Royal Assent on 26th October 2023, after months of legislative scrutiny and some "ping-ponging" between the Houses of Commons and Lords on a few contentious issues. The Economic Crime and Corporate Transparency Act 2023 (the "ECCTA") is set to shake up Companies House and will impose new obligations on companies, LLPs and limited partnerships in relation to the quality and quantity of information they must provide to Companies House, in an attempt to improve transparency and crack down on economic crime.
Louise Smyth, Registrar of Companies, has said of the ECCTA: "This is one of the most significant moments for Companies House in our long history." Adding "I’m delighted that we can now play a much greater role in disrupting economic crime and preventing abuse of the register, while supporting economic growth and ease of doing business in the UK. The measures set out in the act will give us new and enhanced powers to improve the quality and reliability of our data."
Kevin Hollinrake, the Business Minister, commented: "We’re providing Companies House with the tools to take a much harder line on criminals who take advantage of the UK’s open economy, ensuring the reputation of our businesses is not tarnished by the UK playing host to the world’s scammers.
These reforms will remove the smoke and mirrors around companies hiding behind false identities, provide further protection to the public from companies fraudulently using their addresses, and deliver better data to support business and lending decisions across the economy, enhancing the UK’s reputation as a great and safe place to do business."
New requirements on companies and other entities
As we have flagged in our previous articles in November 2022 and August 2023, ID verification requirements for directors and persons with significant control will be introduced as well as the need for an email address to be given to Companies House and more information about shareholders in the Register of Members. Whilst these requirements are not going to come into force until well into 2024, companies would be advised to start planning for them and ensuring they have the necessary information to comply with the new regime.
Failure to prevent fraud offence
The new failure to prevent fraud offence, which we wrote about in August 2023 and October 2023, will have a significant impact on organisations and they will have to put training and procedures in place to ensure compliance. A fuller update on the new offence will be published shortly.
Limited partnership reforms
The ECCTA's limited partnership reforms, some of which we wrote about in December 2022, are likely to have wide ranging implications for limited partnerships including Scottish LPs. We will be publishing further updates on these at a later date.
Timing
The timetable for implementation of the ECCTA will be revealed in due course and draft secondary legislation will be published, as and when the details of the various new requirements are fleshed out. Companies House has yet to invest in an identity verification system so we anticipate that the ID verification regime will take some time to bring into effect. Other reforms, such as the need to confirm 'lawful purpose' on incorporation and the obligation to supply Companies House with a registered email address and maintain an 'appropriate' registered office, will come into force sooner.
Brodies will be publishing regular updates on various aspects of the ECCTA. In the meantime, if you would like to discuss how the ECCTA will impact your business and how to plan for the changes, please get in touch with your usual Brodies' contact.
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