The Economic Crime and Corporate Transparency Act 2023 lays out new responsibilities for directors and persons with significant control.
Companies House
Under English and Welsh law, company directors must file certain things at Companies House and keep them up-to-date, for example, a confirmation, at least annually, as to the shares issued by the company. Companies House is a government agency which examines, stores and publishes all that information and enables online searches and the creation and dissolution of companies. It has not had much change since it was established in 1844 but the following are a significant deepening of its powers.
The Economic Crime and Corporate Transparency Act (‘ECCTA’)
The ECCTA received royal assent on 26 October 2023. It aims to improve transparency in relation to UK companies, support the UK’s national security, disrupt economic crime and improve the reliability of companies’ registers.
Under the phased implementation of the ECCTA, Companies House will have extended powers to verify the identities of new and existing directors, persons with significant control (‘PSC’) and any other person who delivers or files documents with Companies House.
It also creates an offence of the failure to prevent fraud, as well as banning the use of corporate entities as directors.
We set out below the most interesting changes, when they will become effective and how they may impact you.
Identity verification
25 February 2025
Companies House introduces the first phase of the ECCTA allowing trust and company service providers, accountants and solicitors to become Authorised Corporate Service Providers (ACSPs), so long as they are registered for anti-money laundering with a UK supervisor. This first stage enables the ACSPs to conduct identity verification services for their clients and to pass on the results to Companies House.
25 March 2025
Companies House begins allowing individuals (e.g. company directors, PSCs and those who file documents on behalf of the company at Companies House) voluntarily to verify their identity in advance of the requirement becoming mandatory later in the year.
Autumn 2025
Companies House aims to make identity verification a legally required step during company incorporation and on each new appointment of a director or a PSC. From here, a 12-month transitional phase will begin for existing companies to provide identity verification records for their existing directors and PSCs when their confirmation statements become due.
Spring 2026
Companies House will make identity verification of directors, PSCs and other related officers a compulsory requirement. Third party agents filing documents for companies will also be required to registered as an ACSP.
“Failure to Prevent Fraud” offence
The ECCTA creates an offence for large organisations of failing to implement reasonable procedures to prevent fraud within or by their business. This comes into force on 1 September 2025.
The Home Office released guidance on this offence in November 2024. It defines the term ‘large organisation’ as a company satisfying two of the below conditions:
- more than 250 employees;
- more than £36 million turnover; or
- more than £18 million in total assets.
The types of fraud under this offence include:
- false accounting;
- false statements by company directors;
- fraud by abuse of position;
- fraud by false representation;
- fraud by failing to disclose information;
- fraudulent trading;
- participation in a fraudulent business;
- cheating the public revenue;
- obtaining services dishonestly.
The guidance outlines how ‘reasonable prevention procedures’ vary depending on the level of control, proximity and supervision the organisation exercises over an individual acting on its behalf.
The guidance also highlights that the only defences are that:
- there are reasonable procedures in place to prevent fraud; or
- the organisation can demonstrate to the satisfaction of the court that it was not reasonable in all the circumstances to expect it to have any prevention procedures in place.
Large organisations must implement reasonable procedures to prevent fraud in advance of the offence coming into force to avoid the risk of unlimited fines.
Corporate entities being used as directors ban
The ECCTA plans to ban the use of corporate entities as directors in the future, however this has no implementation date yet. There will be an exception which permits UK (but not overseas) corporate entities to serve as corporate directors, provided the corporate director has an all-natural person board. Of this all-natural person board, each individual must also verify their identity.
Despite the lack of an implementation date, UK companies should begin removing their corporate directors which do not have an all-natural person board. Alternatively, companies should ensure, if their corporate directors have an all-natural board, that each board member’s identity is verified in time with the ECCTA timeframes above.
How Moore Barlow can help
Moore Barlow can help you to ensure compliance with these and all other relevant laws.
Our team of experienced corporate lawyers provides tailored advice and support to clients across a range of sectors, from start-ups to multinational corporations. Whether you’re looking to restructure your business, acquire a new company, mergers and acquisitions, corporate finance, commercial contracts, corporate governance, and more we have the expertise to help you achieve your goals.
