UK Government improves transparency over corporate entities: 3 key changes that will affect your company

The Economic Crime and Corporate Transparency Act 2023 is new legislation that aims to tackle the use of companies for criminal purposes and address issues with money laundering and fraud.

While the changes are yet to come into force, when they do, there are practical implications for companies of all sizes in England and Wales. Although all these changes are not covered in this article, if you are a company owner, you need to be aware of the following:

Directors and persons with significant control (PSCs) must verify their identity

As of 2022, there were over 2,000,000 actively trading limited companies in the UK. In England and Wales, all of those will have at least one natural person as a director and are very likely to have PSCs or relevant legal entities (companies meeting the same qualifying criteria as PSCs) (RLEs).

Under the new rules, it will be a criminal offence for both an individual to act and, for a company to allow that individual to act, as a director or PSC whilst their identity is unverified.

RLEs will be required to nominate an individual (e.g. a managing officer) whose identity must be identified on their behalf.

There are two proposed methods for identity verification:

• via an Authorised Corporate Service Provider (ACSP) (including legal professionals, auditors, accountants, tax advisers or company service providers); or

• via a new Companies House system (details yet to be revealed).

Avoid issues by:

• Identify: your company's current PSCs/RLEs and directors.
• Anticipate: whether your company will be appointing any new directors or whether there will be any PSC/RLE changes.
• Verify: obtain copies of identity documents for relevant individuals as soon as possible in readiness for satisfying the verification requirements.

Limits to who can file documents on behalf of your company

Previously (with some exceptions) anyone could file documents at Companies House on behalf of a company. A company will now only be able to file documents through a director, company secretary, employee or ACSP that has verified their ID.

In practice, this will affect some companies more than others. For example, issues may arise for groups with numerous dormant companies or holding companies that have no employees or company secretary to file on their behalf.

Avoid issues by:

• Identify: who currently files documents on your behalf and obtain copies of their ID to avoid any issues once the verification requirements commence.
• Consider: appointing an ACSP who can manage filings on your behalf.

Maintenance of Statutory Registers and Company Contact Information at Companies House

Your company will no longer be required to maintain its own:

1. Register of Directors;
2. Register of Directors’ Residential Addresses;
3. Register of Secretaries;
4. PSC/RLE Register.

Instead, your company will be required to file (within 14 days) details of the directors, secretaries and PSCs/RLEs at Companies House only.

You will still be required to keep your own Register of Members (shareholders). However, there are new additional requirements to include in the register a forename, surname and service address for all former members.

Additionally, new restrictions have been introduced relating to your companies contact information including a requirement for companies to not use a PO Box as their registered office address and a requirement for all companies to register and maintain an appropriate email address.

Avoid issues by:

• Verify: the information in your statutory registers relating to shareholders, directors, secretaries and PSCs/RLEs to ensure that they are up to date ready to be filed at Companies House.

• Review: the information in your Register of Members relating to both current and past shareholders. If any information is missing (including a service address for all past shareholders), obtain it as soon as possible.

How can we help?

If you require any assistance with any of the changes detailed above, please contact any of the members of our team detailed below.