Date
29 Feb 2024Category
AdvisoryThe long anticipated Economic Crime and Corporate Transparency Act 2023 (ECCTA) became law on 23 October 2023 and will introduce significant reforms to the existing UK legislation with the aim to bolster existing safeguards against economic crime and improve corporate transparency.
Except for certain provisions on money laundering, the proceeds of crime, and the new offence of Corporate Criminal Liability, which are already in force, the vast majority of the ECCTA’s provisions will be rolled out in phases during 2024.
These changes will predominantly impact corporate entities registered at Companies House, including companies, LLPs, and limited partnerships (here we are referring to “companies” for ease). As these reforms unfold, businesses must stay informed and proactive to ensure compliance.
Enhanced powers for the Registrar of Companies (coming into force on 4 March 2024) are aimed at improving the quality of the information available at Companies House. The Registrar will have the power to query, reject or remove documents submitted for filing if there is a reason to believe that the details are inconsistent with other information shown on the records held at Companies House. The Registrar will also be able to request additional information and to annotate a document on the public register if there is uncertainty regarding the information disclosed.
Consider whether the information previously filed at Companies House may be inaccurate or inconsistent in any way. Take steps to rectify early to avoid rejected filings which could impact new directors’ appointments and their ability to act.
One of the most significant changes brought by the ECCTA will be the introduction of the new corporate offences:
Implement robust internal compliance procedures and consider whether senior managers with a significant role in the business may need training to raise awareness of the new corporate criminal liability offence.
When the relevant sections of ECCTA come into force, all new and existing company directors, members of an LLP, general partner of a limited partnership (LP), PSCs and anyone else submitting filings for the company at Companies House will be required to verify their identity and to disclose whether they are disqualified under the Company Director Disqualification Act 1986 (CDDA).
Without ID verification, or if disqualified, they will be prohibited from being appointed and from acting in any capacity. These requirements will not apply to the shareholders unless they are also PSCs. Where a corporate entity is running or controlling a UK company, each of its own directors must verify their identity.
It’s important that you check:
Corporate directors have not been abolished but the permission to continue to act has been narrowed down to UK corporate entities with a legal personality whose own directors/officers are all natural persons whose IDs have been verified.
Existing companies that have a corporate director that does not meet the new requirements will have 12 months from the date when the relevant provisions come into force, to ensure that their corporate director complies or to resign them if non-compliant.
Despite having a separate legal personality, a Scottish Limited partnership will not be capable of being appointed as a general partner of a limited partnership.
If there is a corporate director, consider is it still needed. If the company is not incorporated in the UK and its directors are not all natural persons, the company should replace its directors with a UK corporate director meeting the necessary requirements within the next 12 months.
Companies will be required to show the full names of the subscribers and shareholders, companies limited by guarantee must disclose the full names of guarantors, on the register of members and the filings submitted to Companies House.
To bring the Registrar’s records up to date, there will be a requirement to provide a one-off summary of all the subscribers and shareholders in a company (in the case of a listed company those owning over 5%) as well as of all PSCs.
The list will likely be submitted with the first confirmation statement filing after the relevant provisions come into force.
If there are any discrepancies in the names of the shareholders who are also PSCs, these will be flagged up when these individuals complete their ID verification. This will flag up the inconsistencies in the historical filings and will cause future filings to be rejected. Rejected filings may impact certain transactions and the validity of directors’ appointments.
Check if the company’s registers, and the filings made at Companies House, show the full names of the shareholders. If not, take the steps to have the names rectified on the share register.
Consider if there is a need to change the company’s ARD before the restriction comes into force. Going forward the changes will be permitted only once every five years.
Once the relevant sections of ECCTA come into force, there will be additional compliance obligations and certain restrictions for UK Limited Partnerships (LPs).
From 4 March 2024, companies forming in the UK must confirm:
Consider whether there will be a need to incorporate a new company, register LLP or LP and ensure that individuals to be registered as the company’s first directors or PSCs have verified their identity.
If you have any questions in regards to the ECCTA or would like assistance ensuring your business stays compliant under the new requirements of the ECCTA, please get in touch with your usual Azets advisor or a member of our team.
