Authors
Authors
Diana J. Simmons
Key takeaways
- Companies House has announced that the first set of changes under the Economic Crime and Corporate Transparency Act will come into effect on 4 March 2024.
- From March, all companies will need to have an "appropriate" registered office address, supply a registered email address and confirm both on incorporation and annually that their activities are lawful.
- Enhanced powers for the Registrar of Companies mean that companies should expect a more robust approach being taken to information filed.
- The Registrar will, from May, have power to directly impose a financial penalty (of up to £10,000) as an alternative to criminal sanctions.
- Companies House has announced an increase in filing fees effective 1 May 2024.
Key changes for companies from 4 March 2024
The Economic Crime and Corporate Transparency Act received Royal Assent on 26 October 2023. It aims to improve the accuracy and quality of data filed with the Registrar of Companies (Registrar) and thus help tackle economic crime and boost confidence in the UK economy. We have produced an overview of the key company law changes under the Act. The Act is coming into force in stages, with the following changes intended to be introduced for all companies on 4 March, once the necessary secondary legislation is in place:
Registered office address to be “appropriate”
- Companies must have an “appropriate address” as their registered office. Appropriate means that the documents being sent to the registered office address will come to the attention of a person acting on behalf of the company and that the delivery can be acknowledged. A PO Box will not be sufficient.
- Companies House has indicated that it will take action in the event of default. If it finds that a registered office address is not appropriate, it will be changed to a default address at Companies House. The company will then have 28 days in which to provide an appropriate address, with evidence of proprietary ownership, otherwise Companies House may start the process to strike the company off the register.
Registered email address
- All companies must provide Companies House with a registered email address for Companies House communications. As of 4 March, new companies will need to do so when they incorporate and existing companies will need to provide an email address when they file their next confirmation statement with a statement date of 5 March 2024 onwards.
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
Authors
Authors
Diana J. Simmons