Member Article

Bringing in major reforms for the UK’s companies registry, administrative changes for companies and new measures to combat economic crime, the Economic Crime and Corporate Transparency Act 2023 is set to strengthen the UK’s economy’s position as a trusted place for business.

Large, open economies are highly attractive for worldwide business, but with openness comes susceptibility to fraud and economic crime. Recognising the need to reduce corruption, the UK was the first economy to commit to making beneficial ownership transparent. The PSC regime, which records beneficial ownership information of corporate entities on the public register, has been in place in the UK since 2016 and transparency of property ownership was established by the introduction of the Register of Overseas Entities in 2022. The new Act seeks to build further on these transparency measures by improving the reliability of the data held by Companies House and providing the Registrar with a greater role in tackling economic crime.

Whilst royal assent for the new Act was granted on 26 October 2023, the vast majority of its provisions await implementation and secondary legislation. The Companies House reforms, in particular, will require significant system changes so the timing for implementation will be dependent on those technical changes being completed. Looking ahead, we can expect:

• the introduction of identity verification for directors, people with significant control and those who file documents on behalf of companies
• greater powers for Companies House to query information submitted for filing and new powers for it to share data with law enforcement agencies and other government departments
• new rules for registered office and registered email addresses
• changes to information required in confirmation statements
• changes to small company accounts filing options and a transition towards filing accounts by software only
• the ability for individuals to suppress personal information on historical documents and to apply to have personal information protected from public view
• additional filing requirements for limited partnerships
• new requirements to provide additional shareholder information

The changes are expected to apply generally (with appropriate modifications) to all entities registered at Companies House in England, Wales, Scotland and Northern Ireland including private limited companies, public limited companies, limited liability partnerships, limited partnerships, community interest companies and overseas companies. Restrictions on the use of corporate directors, which was first legislated for in the Small Business Enterprise and Enforcement Act 2015, but which has been the subject of further consultation, will also be implemented.

The Act also introduces:

• amendments to the Register of Overseas Entities requirements to maintain consistency with the changes to the Companies Act 2006 and to require overseas entities to provide details of all land owned in the UK when applying for registration at Companies House or updating existing registration details
• new powers to quickly and more easily seize and recover cryptoassets
• an early dismissal mechanism for strategic lawsuits against public participation (SLAPPs – typically used by wealthy individuals to evade scrutiny in the public interest), initially in relation to economic crime
• a new failure to prevent fraud offence covering large companies which meet two out of the following three criteria: (a) more than 250 employees; (b) more than £36 million turnover; (c) more than £18 million in total assets. 

Already in force is a new statutory ‘senior manager’ test for specified economic crimes (e.g., theft, fraud, bribery and money laundering). This brings senior managers within scope of who can be considered as the ‘directing mind and will’ of a body corporate or partnership such that the organisation itself will be guilty of the offence.

The Companies House changes are the biggest since corporate registrations were first established in 1844 and will see it move from being simply a recipient of corporate information to an active gatekeeper with powers to improve the quality and reliability of data. Companies House has announced that a number of the changes are expected to come into force in March 2024 (see here) and, beyond the Act, more is expected in the UK’s fight against corruption, with the government initially considering the role which trusts play in disguising beneficial interests in property.

 

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