Companies House Update: ECCTA transition plan published
On 16 October 2024, Companies House published an outline transition plan for reforming the role of Companies House in connection with the Economic Crime and Corporate Transparency Act 2023 (ECCTA). The plan summarises provisions that are already in effect and provides an indicative timeline for implementation of the remaining changes.
The aim of ECCTA is to reform the role of Companies House and improve transparency around UK companies and other legal entities by strengthening Companies House’s ability to identify and prevent economic crime, while also enhancing the accuracy and reliability of the information it holds. As such, ECCTA brings the most significant changes to Companies House since corporate registrations began in 1844.
The changes to be brought in by ECCTA are being implemented in phases, with full implementation expected by 2027. However, a firm timetable cannot be set as timelines are dependent on suitable Parliamentary time in both Houses. Indicative key dates as set out in the transition plan are:
Enhanced powers for the Registrar of Companies (Registrar) – since 4 March 2024, several key measures have already been introduced which enhance the Registrar’s powers. These include questioning company-submitted information and requesting evidence when necessary, applying stricter checks on proposed company names to prevent fraud, annotating misleading or inconsistent information in the public record, cleansing the public record using data matching technology, and sharing data with other government departments and law enforcement bodies.
Financial penalties – since 2 May 2024, Companies House has had the power to issue financial penalties for offences under ECCTA and the Companies Act 2006. It published guidance on how it will exercise this new power in September of this year, setting out the steps it will take to impose penalties, the types of penalty, penalty calculations, and actions a person can take if the Registrar suspects that they have engaged in conduct amounting to a relevant offence.
Striking off – by winter 2024 / 2025, Companies House will be able to expedite the striking off of companies if the Registrar concludes they have been formed for a false basis.
Identity verification –
By spring 2025:
- UK anti-money laundering service providers will be able to register as Authorised Corporate Service Providers (ACSPs). This will enable them to offer identity verification (IDV) services and confirm details to Companies House.
- Individuals will have the option to voluntarily identify their identity.
- Companies House will be able to assess applications from individuals seeking to have residential addresses suppressed from public disclosure.
By autumn 2025:
- Upon incorporation, all directors and Persons with Significant Control will have to verify their identity. Existing companies will have a 12-month transition period to comply.
By spring 2026:
- IDV will be mandatory for anyone filing a document at Companies House.
- Third-party agents filing on behalf of companies must be registered as an ACSP.
- Companies House will be able to reject documents delivered by disqualified directors.
In light of the phased implementation of ECCTA, the process and planning for director appointments will be paramount to ensure timely verification and the validity of these appointments, especially as, once ECCTA has been fully implemented, directors will not be able to act until their identity has been verified. Compliance activity against those who have failed to verify their identity is expected to start in 2026 (i.e. the end of the 12-month transition period), making it prudent for individuals to take advantage of the voluntary IDV procedure in early 2025.
Limited Partnerships (LPs) – reforms to LPs will not take place until 2026. From spring 2026, LPs must:
- provide each partner’s name, date of birth and residential address;
- verify the identity of general partners;
- provide a registered office address in the UK;
- provide a standard industrial classification (SIC) code;
- file an annual confirmation statement; and
- file information through an ACSP.
Companies House will also have new powers to:
- close and restore LPs;
- apply sanctions;
- protect partners’ information; and
- operate a statutory compliance process.
Accounts –following accounts reform, Companies House should be able to:
- mandate software-only filing for all accounts;
- remove the option for small companies and micro-businesses to file abridged accounts;
- require all companies to file profit and loss accounts;
- require companies claiming an audit exemption to provide an enhanced statement from their directors on the balance sheet; and
- limit the number of times a company can shorten its accounting reference period.
Corporate directors – following the implementation of restrictions on corporate directors, only UK corporate entities will be eligible to serve as corporate directors; overseas companies will be prohibited from doing so. Any corporate director will be required to have an all-natural person board, and each member of the board must verify their identity in order to be registered.
Accounts reform and the implementation of restrictions on corporate directors have not yet been timetabled.
The Companies House reforms which ECCTA will implement are wide-ranging but the expected timetable allows companies and their advisers time to put in place the necessary processes and effect the changes. Companies are advised to begin thinking about what these reforms mean for them as soon as possible to avoid any unexpected surprises.
For guidance on how to confidently navigate the new rules, please get in touch through our website or through your usual Forsters’ contact. Our corporate team is primed to answer your questions.
Subcribe to news and viewsThe Act gives Companies House the power to play a more significant role in disrupting economic crime and supporting economic growth.
https://www.gov.uk/government/publications/economic-crime-and-corporate-transparency-act-outline-transition-plan-for-companies-house/economic-crime-and-corporate-transparency-act-outline-transition-plan-for-companies-house
