Statement of lawful purpose

• There will be a new requirement on incorporation on or after 4 March 2024 for subscribers to confirm that they are incorporating a company for a lawful purpose.
• All companies will need to confirm annually on the confirmation statement that their intended future activities will be lawful. This will apply to all confirmation statements with a statement date from 5 March 2024 onwards.

Broadening of Registrar’s powers

• The Registrar will have new and enhanced powers to query information and request supporting evidence. These powers are linked to the new objectives introduced for the Registrar by the Act to ensure that documents are filed, that the information on the register is accurate, that those records do not create a false or misleading impression and to prevent companies from carrying out unlawful activities.
• The new powers will mean that Companies House will have greater powers to scrutinise, query and reject information that is provided to it both before and after it is accepted and published on the register. Queries may arise from its own investigations or from information received from third parties. These queries will start with a formal request for more information and supporting evidence.
• The enhanced powers will also enable the Registrar to remove false, misleading or incorrect information more quickly than it is currently able and to share information with law enforcement agencies and other government departments.

Enforcement and sanctions

• If a company is issued with a formal request for further information and fails to respond within 14 days, this is a criminal offence and serious consequences may follow, including prosecution, financial penalty or an annotation of the company’s record on the register to stop it misleading the public. It is therefore important to ensure that information filed is accurate, contains no omissions and is filed promptly.

New financial penalty regime

• The Act introduces a new financial penalty regime that will sit alongside criminal sanctions. From May, once regulations are in place, the Registrar will have power to impose a financial penalty directly, as an alternative to pursuing criminal prosecution through the courts, if satisfied beyond reasonable doubt that a person has engaged in conduct amounting to a relevant offence under the Companies Act 2006. The maximum penalty under the new regime will be £10,000.
• Currently, the only civil penalty regime operated by Companies House is the late filing penalty regime, where a company automatically incurs a penalty for failing to file its accounts on time. That regime will remain unaffected by the new power.

In addition to the measures that become effective in March, Companies House has published details of increases in its various fees for incorporation, registration and filing. These increases take effect on 1 May 2024.

The above changes are just some of the measures being introduced by the Act. Others - such as the proposed new identity verification process for directors, people with significant control and others - will be brought in at a later date. Companies House has launched a new website, entitled “Changes to UK company law”, which provides further information on upcoming changes being introduced under the Act as they become available. We will of course continue to monitor these changes.

Client Alert 2024-048