The Economic Crime & Corporate Transparency Act 2023 (ECCTA 2023) represents a significant overhaul of company law in the UK, introducing a raft of changes and new requirements designed to enhance corporate transparency and combat economic crime. Businesses need to get to grips with these changes to ensure compliance. Here’s a comprehensive overview of what you need to know, drawing from recent guidance.
Key Focus: ID Verification
A central pillar of the new Act is the introduction of compulsory identity verification for key individuals and entities. This applies to:
- Directors: For new incorporations, ID must be verified before incorporation. For new appointments to existing companies, ID verification and notification to Companies House are required prior to the appointment. Existing directors will need to verify their ID during a 12-month transition period starting in Autumn 2025, linked to the annual confirmation statement (CS01). It will be an offence to act as a director without verified ID and notification.
- People with Significant Control (PSCs): For new incorporations, ID verification is needed within 14 days of incorporation. For new appointments, this timeframe is also 14 days from appointment. Existing PSCs must verify their ID within 14 days of their company’s CS01 date during the transition period.
- Relevant Legal Entities (RLEs): For new incorporations, the ID of one “relevant officer” must be verified within 28 days. The same applies to new appointments. Existing RLEs need to have a relevant officer verified within 28 days of the CS01 date during the transition.
- Authorised Corporate Service Providers (ACSPs): These entities, supervised under anti-money laundering regulations, will also be subject to ID verification requirements for their directors/partners and will need to apply to Companies House for authorisation. Registration opens on 25 February 2025.
- Presenters: Individuals delivering documents to Companies House will face compulsory ID verification from Spring 2026.
Crucially, ID verification attaches to the individual, not the role. Once an individual’s identity is verified, they won’t need to repeat the process for new appointments. Verification can be done directly with the Registrar or through a statement from an ACSP. ACSPs submitting a verification statement must include specific details and keep records for 7 years. From Spring 2026, third-party agents will generally need to be ACSPs. Voluntary ID verification will be possible from 25 March 2025.
Enhanced Powers for Companies House
The Act equips Companies House with significantly enhanced powers to ensure the integrity of the register. These include:
- New objectives focused on the accuracy and completeness of information, preventing misleading impressions, and minimising unlawful activities.
- The power to issue financial penalties for relevant offences from Autumn 2024.
- The ability to annotate the register with important information, such as a director yet to resign despite being disqualified.
- A new power to expedite the striking off of companies formed on false grounds.
- Increased authority to query and reject documents that are not properly delivered or contain inconsistencies. Rejected documents will be treated as if never delivered.
- A new power to require information.
- The power to reject documents delivered by disqualified directors (unless facilitated by an ACSP for specific permitted filings) from Spring 2026.
- New powers to cross-check information with other public and private sector bodies by the end of 2026.
- Changes to the form and manner of delivering information, promoting digital delivery and mandating “proper delivery”.
- The ability to remove unnecessary material from the register.
Companies House has also outlined a Compliance Framework with varying levels of compliance and methods of enforcement, ranging from providing guidance to pursuing criminal prosecution.
Changes to Filing Requirements
The Act brings changes to who can file documents and the manner of filing. It emphasises ensuring that all required documents are delivered with complete and accurate information. Mandatory filing via software is planned for the future, subject to an extensive notice period. The rules regarding who can file on behalf of individuals and entities at Companies House are being updated to reflect the new ID verification requirements, specifying the need for the filer’s identity to be verified or for them to be an ACSP or their officer/employee.
Impact on Financial Statements and Partnerships
The ECCTA 2023 also introduces changes related to financial reporting and partnerships:
- Modifications to small and micro filing options, a push towards electronic filing, and changes to audit exemption eligibility are on the horizon.
- For Limited Partnerships, many company law provisions will now apply, and the concept of a “managing officer” of a General Partner is introduced. HMRC will also have the authority to request LP accounts from a General Partner. Additional reporting requirements for Limited Partnerships are expected by the end of 2026.
Register of Overseas Entities
The rules surrounding the Register of Overseas Entities (ROE) are also being strengthened. There will be more detailed provisions and disclosure requirements for land and property held in trust, including information about beneficiaries. The enhanced powers of Companies House to query and reject information will also extend to the ROE. Companies House will gain the power to request certain Trust information for the ROE from Summer 2025.
New “Failure to Prevent” Fraud Offence
A significant addition is the new “Failure to Prevent” (FTP) Fraud offence”, which will come into force on 1 September 2025. This will apply to large UK “incorporated bodies and partnerships,” including UK subsidiaries of large UK groups. The offence occurs when fraud is committed by an associated person (employee, agent, subsidiary, etc.) intending to benefit the organisation or its clients, regardless of whether senior management was aware. Organisations can defend themselves by proving they had “reasonable procedures” in place to prevent fraud or that it was not reasonable to expect such procedures. A robust fraud prevention network should encompass top-level commitment, risk assessment, proportionate prevention procedures, due diligence, communication (including training), and monitoring.
Updated Company Size Thresholds and Disclosure Requirements
- There will be an uplift in company size thresholds for micro, small, and medium-sized enterprises, effective for periods beginning on or after 6 April 2025, with the option to apply them retrospectively.
- Audit and consolidation exemption thresholds will also increase. However, the thresholds for SECR remain unchanged. For periods starting on or after 6 April 2025, certain disclosure requirements will be removed from the directors’ report, as this information is expected to be covered in other sections like the strategic report (s172 statement, Business Review, Principal Risks & Uncertainties) or accounting standards.
Other Notable Changes
The Act also includes updates regarding:
- The requirement for email and postal addresses.
- The articulation of a company’s legal purpose.
- Regulations concerning disqualified directors.
- Rules around company names.
- Updates to the Proceeds of Crime Act 2002 (POCA) and Anti-Money Laundering (AML) legislation, including facilitating the recovery of cryptoassets and other digital assets used in criminal activities.
- The ability to apply from 27 January 2025 to have residential addresses suppressed in certain circumstances.
Preparing for the Changes
Businesses should now be actively preparing for these changes. Key steps include understanding the new ID verification requirements and timelines, reviewing internal procedures for preventing fraud, and assessing the potential impact of the updated company size thresholds and disclosure requirements. Staying informed and seeking professional advice will be crucial for navigating this evolving legal landscape.
Disclaimer
This information is for general guidance only and should not be considered professional advice. Always consult with a qualified professional for specific advice related to your circumstances.