The first changes to UK company law have now come into force and it is important that company directors ensure they comply with the new requirements.
What is the Economic Crime and Corporate Transparency Act?
The Economic Crime and Corporate Transparency Act 2023 enhances the powers of Companies House and law enforcement agencies to fight fraud, corruption and money laundering. Described as the most significant change for Companies House in its 180-year history, the act introduces new statutory objectives for the Registrar of Companies, and provides the registrar with a suite of new and enhanced powers, to enable them to meet their objectives.
The registrar’s objectives are:
to ensure that anyone who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with)
to ensure information contained in the register is accurate and that the register contains everything it ought to contain
to ensure that records kept by the registrar do not create a false or misleading impression to members of the public
to prevent companies and others from carrying out unlawful activities or facilitating the carrying out by others of unlawful activities
These objectives also apply to the Registrar of Companies for Scotland and the Registrar of Companies for Northern Ireland.
Key changes for companies
The first measures, came into force on March 4, and aim to improve the quality and reliability of data on the companies register and tackle misuse, to remove details of those appointed without consent.
Registered offices
All companies must, at all times, have an appropriate address. A PO Box can no longer be used as a registered address. An appropriate address is described as:
any documents having been sent to the registered office should be expected to come to the attention of a person acting on behalf of the company, and:
any documents sent to that address can be recorded by an acknowledgement of delivery.
If companies fail to comply with the above, there may be a financial penalty, an annotation on the company’s record and/or prosecution.
Confirmation statements and registered email address
All companies must provide a registered email address. This will be for Companies House to communicate to the company and importantly will not be available to the public. Now, any new companies wishing to incorporate, will need to give a registered email address when they file their next confirmation statement, with a confirmation statement date from 5 March 2024 onwards. All companies will need to confirm that the intended future activities of the company will be lawful and will not be able to file a confirmation statement without this statement being made.
Enhanced powers
Companies House also has greater powers to query information, request supporting evidence, remove factually inaccurate information and share data with government departments and law enforcement agencies.
Further measures in the Economic Crime and Corporate Transparency Act 2023, such as identity verification and accounts reform, will be introduced over a longer period. Companies House says the phased rollout of new powers and requirements is designed to minimise hassle for legitimate businesses. Many of the changes will be integrated into existing reporting cycles, such as the requirement to update a company’s confirmation statement.
Identity verification
Companies House is introducing a new identity verification process to help deter those individuals wishing to use companies for illegal purposes. This will involve anyone setting up, running, owning or controlling in the UK will need to verify their identity to prove they are who they claim to be.
For new companies, all directors and people with significant control (PSC) will need to complete the identification. Any other corporate structure, such as LLPs, will also need to verify their identity. Existing companies will also ned to comply, including all directors (or equivalent) and PSCs.
Anybody who acts on behalf of a company will also need to verify their identity before any information can be filed with Companies House. Companies House is currently putting in place a service to verify identity using ID documents, such as a passport.
Changes to year end accounts
As part of the Economic Crime and Corporate Transparency Act, there are many changes to the year end accounts filing process, and indeed what is filed at Companies House.
Over the next two to three years, company year end accounts will need to be filed through suitable software, before the web-based and paper filing options are no longer available. This will apply to directors who file accounts themselves, and companies who use third party agents or accountants to file their accounts.
Companies House is also streamlining the accounts filing for small and micro-entity companies. These companies will need to file their profit and loss accounts going forward. Currently, there is no date set for this and this will come out in the secondary legislation relating to the act. Small companies that currently do not qualify as micro entities, will also need to file a directors report.
The option to file abridged accounts will also be removed.
Finally, any company claiming an audit exemption will need to give an additional statement from their directors, in that they will need to specify which audit exemption is being claimed, and confirm that the company qualifies for the exemption.
Interestingly, Companies House will also limit the amount of times a company can shorten its accounting period.
Fees
Companies House is increasing its fees and due to introduce the new rates on 1 May 2024. The fees are set on a cost recovery basis.
If you would like advice and support about how these changes could impact your business, please get in touch. Call 0808 144 5575 or email help@armstrongwatson.co.uk.
