Economic Crime and Corporate Transparency Act – what you need to know

10 minute read
13 February 2024

The Economic Crime and Corporate Transparency Act 2023 (Act), whose progress we reported on in our earlier article, was given Royal Assent in October last year. Although much of the detail and timings are yet to be made clear, some provisions are already in force, or are expected to come into on 4 March 2024.

The following is a summary of the key provisions, giving an indication (where known) of their current status.

New offences

Failure to prevent fraud: There will be a new failure to prevent fraud offence, by which an organisation will be liable where a specified fraud offence (including offences under the Fraud Act and fraudulent trading) is committed by an employee or agent for the organisation's benefit, and the organisation did not have reasonable fraud prevention procedures in place. This offence will only apply to large organisations where an organisation satisfies two or more of the following conditions in the financial year preceding the year of the offence: (i) comprising more than 250 employees: (ii) generating more than £36 million turnover; and / or (iii) with assets of more than £18 million. Commencement date to be announced.

Liability for economic crimes: Corporate criminal liability laws for economic crimes were extended so as to hold corporations liable where an offence is committed by a senior manager of the corporation. Previously, the law required that an offence was committed by the "directing mind and will" of a corporation. In force from 26 December 2023.

Identity verification

Directors: Every existing director of a UK company (or member of an LLP) will need to have their identity verified. Where a new director is appointed, the company is required to ensure that the director does not act until the verification has been completed. New directors will have to confirm that they are not disqualified directors. Commencement date to be announced.

Corporate directors: It is envisaged that the Government will introduce regulations around corporate directors alongside the Act. It is likely that a company will be allowed to have corporate directors (provided they are corporate entities with "legal personality") but the directors of any company which acts as a corporate director must all be natural persons and their identity must be verified. Commencement date to be announced.

Persons with Significant Control (PSCs): All existing (and new) PSCs will need to verify their identity. Commencement date to be announced.

Relevant legal entities (RLEs): All existing (and new) RLEs will need to provide the Registrar with the name of a "relevant officer" (a director where the RLE is a company or member in respect of an LLP) whose identity is verified, and a statement provided by that individual confirming that they are the relevant officer. Going forward, the RLE will need to remember to notify the Registrar of any change in the relevant officer (e.g. if a director resigns) and confirm that the identity of any new relevant officer is verified. Commencement date to be announced.

Verification: Verification can be done in two ways: direct verification via Companies House, or verification by an Authorised Corporate Service Provider (ACSP), who is registered with Companies House for the purpose of carrying out these services. ACSPs will be intermediaries such as accountants, lawyers and company formation agents who are registered with a supervisory body for anti-money laundering purposes. In general, verification will be a one-off process and once a person is verified, they will obtain verified status. Commencement date to be announced.

Filing: An individual who delivers documents to the Registrar on their own behalf must have their identity verified. An individual may only deliver documents on behalf of another person if they have had their identity verified, or they are an ACSP (or employee of an ACSP) and the document is accompanied by a statement confirming their verified status and that they have the person's authority to deliver the document. It is intended that Gowling WLG UK LLP will apply for registration as an ACSP for this purpose. Commencement date to be announced.

Confirmation statement

Lawful activities: On incorporation, companies and LLPs will need to confirm that the intended future activities of the company are lawful, and this confirmation must be repeated in each confirmation statement thereafter. In force from 4 March 2024.

Statement of members: As a one time requirement, the first confirmation statement filed after a date yet to be appointed must be accompanied by a statement containing the names of each member, and the number of shares of each class held by them. Commencement date to be announced.

Statutory registers

Register of members: Private companies and LLPs will have to maintain their own register of members and will no longer be able to keep that information on the Companies House central register. The full name of each of their members will be required (rather than just using an initial letter, for example). Commencement date to be announced.

Other registers: The obligation to maintain a register of directors, register of directors' (or members' in the case of an LLP) residential addresses and a PSC register will be abolished. Instead, these registers will be held centrally at Companies House, and companies and LLPs will be required to ensure that the information is kept up to date. Commencement date to be announced.

Company names and addresses

Company name: An additional consideration on choosing a company name will be that the name can be rejected by the Registrar if it could be used to facilitate an offence of dishonesty or deception, suggests a non-existent connection with a foreign government or international institution, or if it contains computer code. In force from 4 March 2024.

Registered email address: Companies (both new and existing) will be obliged to provide the Registrar with an appropriate email address. This address will not be in the public domain and will be solely for use by the Registrar to communicate with the company. Existing companies can supply the address with the next confirmation statement filed after 4 March 2024. In force from 4 March 2024.

Appropriate registered office address: Companies and LLPs must have an appropriate registered address which is somewhere that a document addressed to the company, and delivered by hand or by post, would be expected to come to the attention of a person acting on behalf of the company and is capable of being acknowledged and recorded. This means that if you do not control the premises at the registered office address, you should have arrangements in place to deal with documents delivered there, such as a registered office service similar to that provided by our firm from its Birmingham and London offices. Already in force.

Other changes

Accounts and reports: Specific filing obligations for micro-entities are added, meaning that micro-entities are required to file a balance sheet, a profit and loss and may choose to file a directors' report. Small companies that are not micro-entities are no longer able to prepare abridged accounts, but must file annual accounts and a directors' report. Commencement date to be announced.

Companies House role and powers: Companies House will have new powers to check, remove or decline information submitted to, or already on, the Companies House register (for example, to query suspicious appointments or filings, and to reject documents that are not consistent with information held by the Registrar). The Registrar will be required to ensure that all documents are properly delivered, and that the information contained in them is accurate. In force from 4 March 2023.

What should you do now in light of the changes under the Act?

  • If your company currently relies on a PO Box for its registered office address, you must identify a new registered office and update Companies House before 4 March 2024.
  • Set up an appropriate email address to use as your registered email address (ideally this will not be linked to a particular employee, in case that person leaves the company) and identify who will be responsible for monitoring.
  • Be prepared to include the above additional information in the first confirmation statement filed after 4 March 2024.

There are a significant number of reforms within the legislation, which will impact on all new and existing UK companies and LLPs. As the commencement dates of further reforms are announced, we will publish further briefings to help you understand your obligations.

If you would like to discuss these changes and how they will impact your business, please contact Jeremy Millington, Sharon Ayres or your usual Gowling WLG contact.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.