What this is: In this blog, we will discuss all the changes already implemented by Companies House, as well as upcoming changes.
What this means: As we all know, the Economic Crime and Corporate Transparency Act (ECCTA) came into effect in the United Kingdom in October 2023 with the overarching objective of cracking down on the use of corporate vehicles in economic crimes. Companies House was empowered to enact a series of measures to this end and some of those measures have already taken effect.
What Changes Have Been Implemented Since October 2023?
The first round of changes came into effect in March 2024. These changes involved improving the quality of existing company information in the Companies House register.
Clean-Up of Companies House Data
Many companies received queries from Companies House to confirm that certain information was part of the historical filings made during the life of a company. In some cases, Companies House asked for an explanation of Persons with Significant Control (PSC) filings, in particular, for those companies that had no PSC on record.
Companies House also corrected inaccuracies by removing certain information from the register that was factually incorrect. Names and addresses of certain individuals that were used in connection with a company without their consent were also removed without a need for court orders. We have noticed Companies House rejecting documents notifying the appointment of a new director where the individual is a disqualified director. Some misleading company names were also struck down.
Contact Information of Registered Companies
By introducing a new definition of “registered office,” Companies House has ensured that companies can no longer use a PO Box address or third-party address that has no knowledge of the company in question.
Companies House also now requires new and existing companies to provide a registered email address to allow Companies House to quickly and efficiently contact companies about matters relating to their filing.
Increased Fees and Financial Penalties
The next round of changes was introduced in May 2024. Starting May 2024, Companies House began charging higher incorporation and annual fees to fund investigation and enforcement activities against those misusing the register.
A secondary legalization, known as the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 (enacted in May 2024), confers broad powers on Companies House to impose financial penalties as an alternative to criminal prosecution. In the past, minor offenses, such as late filings, would not have been considered for criminal prosecution. These same offenses may now attract financial penalties.
Companies House will be able to expedite the striking off of companies where the registrar has concluded that the company has been formed on a false basis.
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What Are the Upcoming Changes?
While the exact timelines for these changes are yet to be announced, we expect the following to be implemented in 2025 and 2026.
Registration of Authorized Corporate Service Providers (ACSPs)
It is widely anticipated that Companies House will allow for the registration of ACSPs and authorize them to carry out verification services to existing and new companies by the end of first quarter of 2025. These ACSPs will be governed by the UK’s Anti-Laundering regime. The exact registration requirements are yet to be disclosed.
Identity Verification for Individuals
One of the monumental changes introduced by ECCTA relates to identity verification of individuals connected with companies. At present, there is no way of confirming the identity of persons listed as directors/officers/shareholders/PSCs by Companies House. With the proposed change, all individuals will require their identity to be verified directly or through an ACSP. The initial launch of this verification process is likely to be voluntary and it may commence as early as April 2025 with the potential to become mandatory before the end of the year. When enforced, this will make identity verification a compulsory part of incorporation and new appointments for new directors and PSCs.
In autumn 2025, Companies House is expected to begin the 12-month transition phase requiring millions of existing directors and PSCs to verify their identity. This will be part of the Confirmation Statement filing for existing companies.
At the end of this transitionary period, Companies House should be able to verify the identity of the presenters of any document submitted to them. Third parties used to submit company filings will need to be registered ACSPs. The documents will be rejected unless these requirements are met.
Greater Transparency for Limited Partnerships
In 2026, we can expect Limited Partnerships to be asked to provide more information about their business and offer greater transparency to the users of the information. They will also be required to comply with the identity verification process and will be asked to remove persons who have failed to verify their identity.
Looking Ahead
It is an interesting time for professionals managing UK companies. With the recent and upcoming changes introduced by Companies House, businesses must stay informed and adapt to these new regulations to avoid penalties and ensure smooth operations. It’s crucial for companies to review their compliance strategies and prepare for the upcoming deadlines to stay ahead of the curve. When fully implemented, these changes will forever alter the corporate landscape and hopefully make the UK a safer and better place to do business.
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What is an overview of ECCTA?
ECCTA empowers Companies House with greater oversight of company information, enforces stricter identification measures for directors and significant persons and heightens accountability for larger organizations. The Act also introduces reforms in the operation of UK Limited Partnerships (UKLPs) and strengthens regulations around the misuse of cryptocurrencies. To learn more, read our article, Overview of the Economic Crime and Corporate Transparency Act, 2023 (ECCTA).
What is “re-domiciliation”?
Re-domiciliation (sometimes known as domestication, re-domestication, transfer, continuance or company migration) is a process by which a company transfers its domicile from one country to another, while continuing the existence of the company. To read more on this topic, refer to our article, Transferring Domicile From One Country to Another.
What is an overview of Limited Partnerships in the UK?
In the UK, Limited Partnerships (UKLPs) are governed by the Limited Partnerships Act 1907, which is comprised of general partners and limited partners. The general partners have the responsibility of managing the business of said UKLP and their liability is unlimited. The limited partners contribute funds to the partnership and their liability is limited to the amount contributed, however, generally speaking, they do not have any control over the business. Limited and general partners could be individuals or legal entities.
There is an important distinction between Scottish LPs and the ones formed in rest of the UK (England, Wales and Northern Ireland). Scottish LPs have a legal personality that is separate to its partners. This means that Scottish LPs can hold assets or enter into contracts in their own right. Refer to our article, ECCTA Updates: UK Limited Partnerships Reform, for more information.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.
