Economic Crime and Corporate Transparency Act 2023 changes

Joseph Creasor Joseph Creasor 26 October 2023

Having received Royal Assent today (26 October), the Registrar of Companies has confirmed the changes to theEconomic Crime and Corporate Transparency Act (ECCT) 2023  are expected to be implemented in stages.

The ECCT bill was announced in the Queen's Speech back in 2022.

The reforms are designed to improve transparency and make it easier to track and investigate financial crime.

It proposes to change the way Companies House operates increasing identification and verification requirements of any person registered at Companies House and giving Companies House greater powers of investigation, enabling action to be taken against anyone who is un-compliant.

Companies House has confirmed it will increase its charges in early 2024 to cope with the additional cost of dealing with the reforms, although at the time of writing, these are yet to be published.

Joe Creasor, solicitor in the Company Commercial team at Wake Smith looks at the details.

This article covers:

  • What are the areas of reform?

  • Identification and Verification

  • Failure to comply with the Identification and Verification process

What are the areas of reform?

In an attempt to improve transparency and make it easier to track and investigate financial crime, the ECCT will include a wide range of changes that will impact company’s big and small alike.

In addition to the implementation of a new identification and verification (IDV) process the ECCT will introduce the following:

  • A requirement for all companies, including small companies (i.e. those that meet at least two of the following criteria (1) does not exceed turnover of £10.2m; (2) does not exceed 50 employees; and (3) does not exceed gross assets of £5.1m) to file a profit and loss and have this on public record. The option to file filtered or abridged accounts will be removed.

  • Increase Companies House power to investigate and take action against non-compliant companies or individuals. Such powers could include fines, prosecutions and deregistration.

Identification and Verification

One key reform is that all directors and people with significant control (PSCs) will need to prove their identity to Companies House. This change is designed to make it more difficult for criminals to set up shell companies. All directors and PSCs will need to provide Companies House with proof of their identity, such as a passport or driving licence.

Once registered through the IDV process you will be issued a verification code linking all of your appointments at Companies House. With this code, Wake Smith, acting as a ‘Authorised Corporate Service Provider’ can then make filings as usual on your company’s behalf.

Failure to comply with the Identification and Verification process

If you fail to comply with the IDV process you, the company you are a director of, and all other directors of that company will be committing an offence.

Companies House will be given new powers to investigate and take action against non-compliance with the existing requirements and these reforms. This could include fines, prosecutions, and de-registration.

It is envisaged there will only be a very small window granted for anyone required to comply with the IDV process and it is therefore important to stay informed of the implementation of these reforms. We will continue to monitor the progress of this Bill and distribute updates as and when further information becomes available.

For further information please contact Joe Creasor at Wake Smith Solicitors on 0114 224 2188 or email[email protected]

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