The Economic Crime and Corporate Transparency Act 2023: Companies House publishes timetable for implementation

Companies House has published its much awaited plan (Transition Plan) for implementation of some of the key provisions of the Economic Crime and Corporate Transparency Act 2023 (ECCTA) not yet in force. Delivering the Transition Plan still requires significant investment in terms of Companies House systems and processes, as well as Parliamentary time to enact further secondary legislation. As a result, the new provisions are to be implemented in phases with Companies House anticipating that it will take until 2027 to complete.

Background

The ECCTA was enacted as part of Government efforts to combat economic crime and enhance corporate transparency. Since receiving Royal Assent on 26 October 2023, the Act has reformed the role of Companies House and the Registrar of Companies (Registrar) from a relatively passive information depository to an effective regulator with powers of enforcement.

Our previous update Another step towards transparency: the Economic Crime and Corporate Transparency Act 2023 becomes law gave a general overview of the ECCTA and Economic Crime and Corporate Transparency Act 2023: changes expected to come into force on 4 March 2024 provided an in-depth look at the first major implementation. This update provides a brief reminder of the key provisions already in force and then looks forward to what to expect over the next couple of years, following publication of the Transition Plan.

A reminder: key company law provisions already in force

Since 4 March 2024:

• Companies House and the Registrar have new statutory objectives to ensure the accuracy of the information on the public register and to prevent unlawful activity, together with enhanced enforcement powers to achieve these new objectives.
• The Registrar can now query and remove information from the public register, reject filings and require companies to correct information which appears incorrect, or inconsistent with other filed information.
• Information can be shared with other Government agencies to help prevent economic crime.
• Stronger checks are made on company names, allowing the Registrar to refuse to register names, or to require a name change for existing names in certain circumstances.
• On incorporation, subscribers must confirm the company is being formed for a lawful purpose, and annual confirmation statements now require existing companies to confirm that their intended future activities are lawful.
• Registered offices must be at an “appropriate address” where documents delivered will come to the attention of a person acting on behalf of the company, and an acknowledgement of delivery can be obtained; Companies House can change a company’s registered office if it considers the address is not “appropriate”.
• New companies must register an “appropriate email address” with Companies House on incorporation, and existing companies must provide one with the first confirmation statement filed after 4 March 2024.
• Various amendments were made to the Register of Overseas Entities regime which are detailed here: Focusing on Funds: update on the Register of Overseas Entities regime

In addition, regulations that came into force on 2 May 2024 gave the Registrar the ability to issue a financial penalty to companies and individuals in breach of the Companies Act 2006 as an alternative to pursuing a criminal prosecution. Companies House subsequently updated their guidance on financial penalties giving a range of penalty levels based on the seriousness of the offence and the offender’s history. Any aggravating or mitigating factors can also be taken into account.

Looking forward: Companies House Transition Plan – what to expect and when

On 16 October 2024, Companies House published a policy paper outlining its Transition Plan for the implementation of the principal remaining parts of the ECCTA within its remit. Below is a summary of the key dates together with details of some of the more important elements. 

Identity verification

Identity verification is a key component of the transparency provisions in the ECCTA and, when fully implemented, will require directors, all members of LLPs, PSCs (including relevant officers of relevant legal entities), and individuals filing documents with Companies House to verify their identity. This should be a one-time process so, for example, an individual holding multiple directorships will only need to have their identity verified once.

ID verification will be possible via a number of methods: using the GOV.UK ID Check app; the One Login web journey; or at a Post Office. In addition, ACSPs will also be able to provide ID verification services if they wish. Although the requirements have not been finalised, Companies House have released draft Guidelines explaining what evidence they expect individuals to provide to prove their identity.

By Spring 2025 individuals will be allowed to voluntarily verify their identity and by Autumn 2025 Companies House aim for identity verification to be compulsory on incorporation and on the appointment of new directors and the registration of new PSCs. It is likely that this will also extend to the incorporation of LLPs and the registration of new members of LLPs, although the Transition Plan is not explicit on this.

The process of ID verifying the more than 7 million existing directors and PSCs will take place over a 12-month transition phase (expected to be between Autumn 2025 and Autumn 2026) and will require companies to ensure that their directors and PSCs are ID verified at the time of filing their first confirmation statement during that period. Again, it is likely that the same timetable will apply to LLPs.

Filing at Companies House

In order to improve the accuracy of the register and allow the Registrar to trace information provided to Companies House back to a specific individual, the ECCTA introduces restrictions on who can file information at Companies House. These changes are expected to come into force in Spring 2026 and will mean that a firm making a return will have to have that return filed on its behalf by an ID verified individual who is an officer or employee of that firm (or of a corporate officer of that firm), or by an ACSP acting on its behalf. Individuals filing on their own behalf will also need to have their identity verified. Individuals disqualified under director disqualification legislation will be prevented from filing and will need to use an ACSP instead.

Third-party providers, such as company formation agents, solicitors, and accountants, wanting to become ACSPs must be supervised by one of the UK’s relevant anti-money laundering supervisory bodies and will need to register their business as an ACSP before they can continue to submit information to Companies House on behalf of their clients.

Limited Partnership Regime

Although the Transition Plan makes broad statements that the reform of limited partnerships (LPs) will not start before Spring 2026, and that by the end of 2026 LPs will be expected to submit more information to the Registrar, no further detail is provided. As explained in our previous update, the changes proposed by the ECCTA for LPs are extensive so we expect further details to be released as implementation in other areas progresses.

What is not in the Transition Plan: other ECCTA company law changes

Minor changes to company administration – Changes such as the removal of the requirement to maintain registers of directors and secretaries, and extending the information to be included in a company’s register of members (see our previous update for details) do not have a direct impact on Companies House policies and procedures and so are not referred to in the Transition Plan. We will provide further updates as and when the timetable for implementation of these reforms is published.

Ban on corporate directors – Although the Transition Plan confirms that the ban on corporate directors (passed into law in 2015, but never implemented) will come into force, it does not say when. It confirms that in order to take advantage of the limited exception to the prohibition, a corporate director will itself need to have a board comprised only of individuals, all of whom will need to be ID verified. In addition, only corporate entities that have legal personality and are registered in the UK will be able to act as a corporate director.

Accounts reform – The ECCTA makes a number of accounting reforms, mainly aimed at small and micro companies, which are summarised in our previous update. In addition, the Transition Plan indicates that Companies House will be moving to software-only filing for company accounts in the future. There is no indicative timetable given for these changes, but the move to software-only filing will be preceded by a formal notice period allowing companies time to prepare for this.

Register of Overseas Entities regime – Although certain amendments made by the ECCTA to the Register of Overseas Entities Regime came into force on 4 March 2024, other amendments, such as requirements to disclose property title information, additional information about trusts, and registrable beneficial owners in a period before 31 January 2023, have not yet come into effect and are not referred to in the Transition Plan. For more information, see Focusing on Funds: update on the Register of Overseas Entities regime.

Corporate offence of failure to prevent fraud - This element of the ECCTA is not within the remit of Companies House and so is not mentioned in the Transition Plan. As we highlighted in Economic Crime and Corporate Transparency Act 2023: Royal Assent for failure to prevent fraud and reform to Corporate Criminal Liability, this new offence forms part of a package of reforms designed to make serious changes to corporate criminal law in the UK. We are yet to hear when the Government expects to introduce the offence, or to publish statutory guidance on the procedures companies can put in place to avoid committing the offence. Again, we will provide further updates when more information is released.

Conclusion

The implementation of the ECCTA marks a significant shift in the UK's approach to corporate transparency and economic crime. Companies House have already made use of their new powers and, according to a progress report published in May 2024, in the first month of implementation thousands of misleading entries were removed from the register,  including 4,000 registered office addresses and  2,100 officer addresses, and 3,600 incorporation documents were redacted to remove personal information included without consent. A further 3,800 companies using PO Box addresses as registered offices were contacted to provide an “appropriate” registered office address.

However, the most far reaching changes for companies, their owners and directors are still to be implemented. The Transition Plan provides welcome detail on the timing of these changes, allowing companies to start planning for their implementation.

If you would like to discuss any of the above with a member of the CMS team, please get in touch with your usual CMS contact.