Quick Summary 

The UK is home to one of the world's most open economies, which attracts business from all over the world. This results in a diversified economy for business leaders, but it also leaves space for a few risks. One of these risks is the ability to take advantage of the open economy to facilitate illegal activities such as money laundering and serious fraud. Acts of economic crime like money laundering perpetuate organised crime in the UK and abroad, due to this, the UK government passed the new Economic Crime and Corporate Transparency Act (ECCT). 

Illegitimate businesses undermine the thousands of legitimate enterprises which exist and thrive in the UK, the ECCT Act will help clean the economy and allow the UK to continue being one of the largest open economies in the world. 

The Economic Crime and Corporate Transparency Act will deliver:

• reforms to Companies House
• reforms to prevent the abuse of limited partnerships
• additional powers to seize and recover suspected criminal cryptoassets
• reforms to give businesses more confidence to share information in order to tackle money laundering and other economic crime
• new intelligence gathering powers for law enforcement and removal of nugatory burdens on business

Although the Bill has received royal assent and is now an act, the changes will take some time to fully come into effect. Therefore, you do not need to do anything differently yet but be prepared for changes. Some measures, such as identification checking (explained below) will not be introduced straight away, however, you can expect to see a few early measures begin to take place at Companies House. 

How the Bill Changes Things

The main effect of the ECCT Act concerns the Companies House reforms. So let's look a little closer at what these reforms hold. 

Companies House Will Introduce Identity Verification

The part of the Act which has an effect on us (company formation agents), budding business owners and UK companies is the reform of Companies House. As it stands Companies House does not carry out any ID checks on those who register a company with them, as company formation agents- we do. Companies House will begin to check the identity of all new and existing company directors, Persons of Significant Control (PSCs), and those delivering the documents to Companies House (agents, accountants etc). 

This aspect of the Act is not immediately implemented, however, Companies House will be able to retrospectively check identification. If you are planning on registering your company soon please be prepared that your Identification will be needed.

Broadening Companies House’s Powers

Secondly, the Act means that the Registrar of Companies House will have broader powers. Allowing them to take a more active role in contesting and investigating peculiar information submitted or already on the register. 

Companies House will have more effective investigation tools and introduce better cross-checking of data with other public and private sector bodies. Companies House will be able to reject documents which contain inconsistencies, this document will be considered as ‘not delivered’. 

Other Ways We Can Expect Companies House To Take a More Active Role.

• The registrar will be able to scrutinise and reject information that seems incorrect or inconsistent with information already on the register. In some cases, they will be able to remove information.
• They will implement stronger checks on company names
• There will be new rules for registered office addresses which will mean all companies must have an appropriate address at all times. Companies will not be able to use a PO Box as their registered office address.
• A requirement will be put in place for all companies to supply a registered email address
• A new requirement for all companies to confirm they’re forming the company for a lawful purpose when they incorporate. Every year, the company will need to confirm that its future activities will be lawful on its confirmation statement.
• Companies House will include annotations on the register to let users know about potential issues with the information that’s been supplied to us
• The registrar will be taking steps to clean up the register, using data matching to identify and remove inaccurate information
• Companies House will begin to share data with other government departments and law enforcement agencies.

These measures will begin to take effect in early 2024

Improving Financial Information

The Act will also mean that the register will improve the quality of the financial information it holds so it is more reliable, complete and accurate. 

One way the Act will improve its financial data is through making changes to the types of files required by smaller companies. Arguably, this is to simplify the filing options. Firstly, it requires small and micro-entities to file profit and loss accounts. Secondly, small companies will no longer have the option to prepare and file abridged accounts. However, micro-entities will continue to have the option to prepare and file a director's report. 

Increase of Fees

We can expect to see an increase in fees for filing with Companies House in early 2024. Companies House reviews its fees yearly and operates on a cost recovery basis. This means their fees must cover the cost of their services. 

Disclaimer

This blog is intended to inform readers about the changes to Companies House. It is not, and should not be considered as legal advice. If you are seeking legal advice, we recommend you consult a lawyer. 

Further reading 

https://companieshouse.blog.gov.uk/2023/10/26/changes-to-uk-company-law-a-big-moment-for-companies-house/

https://www.gov.uk/government/publications/economic-crime-and-corporate-transparency-bill-2022-factsheets/fact-sheet-economic-crime-and-corporate-transparency-bill-overarching

https://companieshouse.blog.gov.uk/2021/01/27/improving-the-quality-of-the-financial-information-on-our-register/