New Powers of Companies House under the Economic Crime and Transparency Act 2023 - Will this be enough?
04 DEC 2023
After a year of discussions, on 26 October 2023, the Economic Crime and Corporate Transparency Bill received Royal Assent and was adopted as the Economic Crime and Corporate Transparency Act 2023 (‘the Act’).
The Act follows on from an earlier economic crime bill, the Economic Crime (Transparency and Enforcement) Act 2022: which was fast-tracked through Parliament in March 2022 in response to the Russian-Ukraine conflict
The Act in overall aims to improve corporate transparency, tackle the abuse of corporate form structure which facilitates commission of economic crimes and improve clarity over beneficial ownership. Furthermore, the Act introduces a ‘failure to prevent fraud’ offence.
In this blog post, we will focus on the developments introduced by the Act in relation to company administration regime under the Companies Act 2006 (‘CA 2006’).
Powers to Companies House
The Act extends the powers of Companies House by imposing broader and more proactive measures to safeguard the accuracy and integrity of its register. Companies House will no longer be a passive institution, but it will be able to challenge, reject or even remove information filed with it. Additionally, where necessary, it will have the power to ask for additional information in connection with a filing. All these shifts are aimed to ensure the overall accuracy and integrity of its register.
Except for the register of members, companies will no longer be obliged to keep its directors’ register, register of secretaries and PSC register because information on directors, company secretaries and PSC will be kept at Companies House. In relation to the register of members, requirements are expected to be enhanced. Specifically, companies will be required to provide their shareholders’ list to Companies House.
Mandatory ID Verification
The Act introduces a mandatory identity verification for future and current directors, as well as for persons with significant control (‘PSC’). While failure to undergo identity verification will amount to an offense, any director performing their duties without being verified could also be disqualified under the directors’ disqualification regime.
This may require companies to implement an appropriate system to manage the verification process, ensuring that no director remains unverified.
The verification requirement also extends to those who file documents on behalf of a company. Therefore, once guidelines as to ID verification is finalised, company secretaries and/or any individual filing on behalf of the company will need to have their IDs verified to continue filing given that only verified individuals will have the authority to file documents with Companies House.
Registered Office at an Appropriate Address
Entities are required to establish and maintain a registered office at a deemed ‘appropriate’ address, along with maintaining a registered email address. The email address is to be used for the receipt of correspondence from the Registrar so that communications reach an individual representing the company.
New Offense: Failure to Prevent Fraud
The Act introduces a new offence – failure to prevent fraud – which aims to hold corporate entities accountable when they have profited from a fraud committed by their employees. This offence ensures that a large entity can be held liable for fraud if a specified fraud offence is committed by an associated person with the intention of benefitting the entity or any associated person of that entity. The term ‘associated person’ covers employees, agents, subsidiaries of the relevant organisation as well as their employees and a person who otherwise performs services for or on behalf of the entity.
Beneficial Owner and Overseas Entities
Although most of the Act relates to UK registered companies, a notable amendment impacting overseas entities is the expanded definition of beneficial owner. The Act broadens the details which must be disclosed as part of the Register of Overseas Entities.
Currently, under the 2022 Act, only the beneficial owner of the overseas entity which owns a property in the UK must be disclosed. With the amendment, the definition of beneficial owner will also include someone for whom an overseas entity holds the property as a nominee. Therefore, this change will have the effect of disclosing the ultimate beneficial owner of property to the public. Property investors who were previously not on the public register will now be included.
Although the Act has received Royal Assent, it is subject to a follow-up legislation. In other words, all these new measures are expected to be implemented upon the adoption of secondary legislation in the future. Granting extensive powers to Companies House mean that it will undergo substantial operational reform. Furthermore, a transitional period of 6-months will apply to certain obligations.
Despite this, along with the Government’s commitment to implement the measures shortly, Companies House has already published an announcement stating that measures not requiring secondary legislation, will come into force in early 2024.
Yulia BarnesManaging Partner
Yulia Barnes is our Managing Partner. She is an experienced solicitor and advises on a wide range of contentious and non-contentious matters for both private and corporate clients.Yulia started her legal career at a large international Magic Circle firm. She then became a partner at a regional law firm and headed a Dispute Resolution Department. She then moved in-house before starting her own Boutique practice, Barnes Law, with the aim of providing exclusive services to high net-worth individuals and privately-owned businesses. More details can be found on her LinkedIn profile.
Expertise Yulia and her team are widely recognised for their professional and practical approach to matters. She is committed to ensuring that her clients’ objectives are achieved in the most cost-effective way possible.
Approach Yulia has a wealth of experience working with businesses of all sizes: from large multinational corporations to start-ups. She has particular expertise in a hospitality industry, investment funds, private and corporate clients, and focuses on startups and technology-driven companies. Yulia brings the same level of attention to detail, professionalism and a personal touch to every case and client, and truly immerses herself in her clients’ businesses. She prides herself on her problem-solving, commercially astute approach and her track record of partnering with clients to help them achieve their strategic objectives.
Will joined Barnes Law as an Associate Solicitor in Spring 2023, shortly after qualifying in September 2022.
Will works mostly on real estate and corporate/commercial matters. Will enjoys providing advice on transactional matters.
Away from the office, Will can be found reading or playing golf. While he played rugby until university, and rowed throughout his degree, he now tends to watch both from the sidelines. During the winter he can also be found skiing.
Will plans to continue developing his legal skills and experience at Barnes Law, under the expertise and guidance provided by Yulia.
Mark is an experienced solicitor whose practice areas include intellectual property (IP), IT, data protection and general commercial law.
Mark advises businesses of all sizes – from sole traders to corporations. Among his clients are: clothing and lifestyle brands, restaurants and food suppliers, IT companies, banks, hedge funds and venture capital firms, education providers, medical and pharmaceutical brands.
Outside of his practice, Mark also advises members of the Institute of Directors as part of its Directors’ Advisory Service.
- Prosecuting a UK trademark application on behalf of an education provider and representing them in related UK IPO opposition and revocation proceedings;
- Advising a publisher and a delivery business on data protection matters, B2B and B2C Ts & Cs of sale, website and app Ts & Cs, all aspects of global brand protection;
- Advising footwear brands, alternative asset managers and hedge funds on their global brand protection, including overcoming various refusals, representing them in opposition proceedings and settlement negotiations;
- Representing a central bank in opposition proceedings before the UK IPO;
- Advising a lifestyle brand concerning trademark clearance and protection, negotiations for a website/app development and maintenance agreement.
Alex joined Barnes Law in September 2023 after finishing his master’s degree in law. Prior to joining Barnes Law, Alex worked in property litigation at Ashfords. Alex assists Yulia on a variety of both contentious and non-contentious matters.
Outside of the office, Alex enjoys reading and hiking. Prior to working in law, Alex was a competitive tennis player.
Alex continues to develop his skills in legal practice under Yulia’s guidance, he plans to sit the Solicitor’s Qualifying Exams (SQE) in 2024.
Mehves joined Barnes Law in August 2023, right after graduating from Queen Mary, University of London (LLB Senior Status). As part of her qualification journey, Mehves is currently pursuing her Legal Practice Course (‘LPC’) at the University of Law. She also holds a degree in European Union Law from Maastricht University, Netherlands.
Mehves works closely with Yulia on a variety of contentions matters and also writes Barnes Law’s legal blogs, manages social media accounts and is responsible for marketing.
Outside of work and studies, she enjoys running, tennis and yoga.
Mehves is looking forward to developing her legal skills at Barnes Law.
Julia PodgornovaInvestor Relationship Manager
Julia guides clients in making important business decisions based on comprehensive risk assessment and strategy. She supports investors in devising strategies designed to maximise each business’s potential from pre-seed to IPO.
Julia’s particular area of expertise are IT start-ups at different stages. Julia supports business through their fund-raising journey. As an Investor Relations Manager, Julia communicates with investors to facilitate a smooth round and legal part of each transaction.
In her free time Julia enjoys sailing, ballroom dancing, art exhibitions and travel.