After some delays, the Economic Crime and Corporate Transparency Bill (ECCT Bill) is currently expected to receive Royal Assent this autumn. A crucial objective of the ECCT Bill is to enhance the powers given to the Registrar of Companies (also known as Companies House).
Whilst exact requirements are yet to be published, some further information has now been provided relating to the new proposed Company House identity verification regime of directors, beneficial owners and those filing information on behalf of a company.
What are the identity verification requirements under the new Bill?
Under the ECCT Bill, all directors, persons with significant control (PSCs) (either individuals, or as a corporate representative on behalf of a corporate PSC), as well as all individuals who register a company or file information on behalf of a company at Companies House, will need to verify their identity, through one of the following two methods:
1) Direct verification through Companies House; or
2) Verification through an authorised corporate service provider (ACSP).
It is expected that direct verification will involve submitting a photograph of an identification document, such as a passport or photocard driving license online, along with a photograph of the individual. These images will be technologically compared, and if they match, the identity will be considered verified. The software is expected to be similar to other online systems for electronic verification of identity.
An alternative method is anticipated to be available through ACSPs who are already supervised for anti-money laundering purposes (such as official company formation agents), who would need to be authorised by Companies House to provide such services. Once authorised, they would be able to undertake ID checks as part of the company formation procedure or as an additional service.
Further, it is envisaged that existing directors, PSCs, and others will also be subject to these identity verification requirements, with a transitional time window for compliance. That said, verification is expected to be a one-time exercise for each individual, with the verified status applying across all boards or controlled companies. The current suggestion is that re-verification would only be necessary in limited circumstances, such as a name change.
Are there any time restraints in verifying your ID?
Whilst exact timelines are yet to be determined, it is anticipated that identity verification will need to occur before a company formation application is delivered to Companies House. For existing companies, it is anticipated that any new directors must ensure that their identity has been verified within the 14-day window of notifying Companies House of their new appointment. Similarly, individual PSCs will have a 14-day window to verify their identity after registering with Companies House, whilst corporate PSCs will have a 28-day window.
What if I fail to comply with the ECCT Bill?
It will be an offence for a person to deliver a false, deceptive or misleading filing or statement to Companies House without a reasonable excuse. If such a filing is made knowingly, then this is an aggravated offence. Criminal offences can result in imprisonment of up to two years, or a fine (or both), and civil penalties can be imposed by Companies House. If an individual fails to verify their identity, the incorporation of any new company that they are associated with may be rejected and they may be unable to file information on behalf of companies. The register will be annotated to indicate that the individual is unverified and directors may be disqualified from future directorships. Additionally, a company with an unverified director will commit a criminal offence.
What needs to been done now?
The new regulations are awaited which will provide further clarity. However, it will be important that directors, PSCs and those filing information on behalf of a company become familiar with the required steps to ensure compliance with the ECCT Bill. The ECCT Bill will also have implications for corporate transactions, requiring careful coordination. Pre-completion steps should include gathering the necessary ID documents so that new directors appointed to the board have their identity verified within the relevant time periods.
Ultimately, the ECCT Bill’s identity verification requirements aim to enhance transparency and combat economic crime by ensuring that individuals associated with companies are properly identified and authenticated. By implementing these measures, the UK government aims to use Companies House to bolster corporate transparency, reduce fraud, and strengthen the integrity of corporate information.
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