Economic Crime and Corporate Transparency Act 2023 - what to do now

In late October 2023 the Economic Crime and Transparency Act 2023 ("ECCTA") passed into law. ECCTA represents not only a major company law reform but also the biggest shake-up in the history of Companies House. For details of, and background to, the introduction of ECCTA please read our full briefing.

Implementation of the measures prescribed under ECCTA will be staggered and are dependent on
secondary legislation having been implemented.

Certain provisions of ECCTA came into force on 4 March 2024, including:

greater powers for the registrar to check, query or reject information submitted to Companies House and to request supporting evidence;
measures to clean up the register, using data matching to identify and remove inaccurate information;
provisions giving the registrar greater control over company names;
new rules for registered office addresses and a new obligation for all companies to register an appropriate email address (for existing companies, the email address will need to be registered when the company files its next confirmation statement with a confirmation date after 4 March 2024);
changes to the requirements for registering new companies to include a new statement by subscribers that the company is being formed for a lawful purpose. Going forwards, companies will be required to confirm in the annual confirmation statement that their future activities will be lawful;
the ability to annotate the register when information appears confusing or misleading;
the registrar's new powers to share information with other government departments and law enforcement agencies; and
changes to the directors' disqualification regime, including a new ground for disqualification relating to designated persons under sanctions legislation and a new provision stating that a director who is disqualified under the directors' disqualification legislation will cease to hold office.

In parallel to the provisions being introduced under ECCTA, on 4 March 2024 the government also brought in its power to make regulations relating to exemptions from the ban on the use of corporate directors under the Small Business, Enterprise and Employment Act 2015. Although prohibition itself is not yet in force, this is a signal that it is still on the government's agenda and we anticipate that the prohibition and exemptions will be introduced in the near future.

Based on the underlying provisions and the government's recent Factsheet, we expect that corporate directors will be permitted only where all directors of that entity are natural directors whose identity have been verified, and that there will be a transitional period of 12 months for existing companies with corporate directors.

Now Reading

What should you do now?

Consider taking the following actions:

review all of your UK group companies' registered office addresses:
- P.O. Boxes are not permitted under the new rules; and
- the registered office address must be an "appropriate address" where someone related to the business is capable of taking delivery of documents;
ensure all your UK group companies have a registered email address (going forward, any changes to a company's email address will have to be notified to Companies House);
review all UK group company names to ensure they do not breach any of the new restrictions;
review all UK company boards to identify any corporate directors;
establish that all persons appointed as directors are eligible to act and are not disqualified under the updated directors' disqualification regime;
review all UK group company registers, records and appointments at Companies House to ensure that board, secretarial and PSC compositions are up to date and accurate; and
start transitioning all UK group companies to software-only accounts filing.

Thinking ahead

Thinking ahead to the new offence of failure to prevent fraud which will be brought in under ECCTA:
although we do not yet have a clear idea of timing, there are certain steps you could take now to
make sure you are well prepared. Guidance is expected from the government setting out the
procedures that relevant organisations can put in place to prevent persons associated with them
from committing fraud offences before the new offence comes in. As this guidance is not yet
available, the measures listed below are only suggestions.

Review existing fraud prevention measures and, where relevant, incorporate further measures, such as:
- assessment of risks of fraud in the business and review of existing policies;
- preparation of additional policies and procedures to combat the risk of fraud;
- training on the new duty and any newly implemented policies and procedures;
- financial controls;
- robust transactional and third-party diligence procedures;
- clear and effective fraud audit and monitoring processes; and
- regular and thorough reviews of internal systems and controls to ensure appropriate measures are maintained.