Companies House is changing - here's what companies need to know
On 26 October 2023, the Economic Crime and Corporate Transparency Bill received Royal Assent, and the Economic Crime and Corporate Transparency Act 2023 (‘ECCT Act’) was published. The ECCT Act makes significant changes to the Companies Act 2006.
As a result of the ECCT Act being introduced the role of Companies House will soon change. It will no longer be a notice board for companies to post their information but a gatekeeper of that information.
To enable Companies House to conduct its new role it will need to amend its current processes, systems, and guidance. These changes will require secondary legislation which is currently being prepared.
It may be another year before the changes are fully realised but it is important that companies are prepared for what lies ahead over the coming months.
What is changing?
- Any information the Registrar receives will be able to be queried, cross-checked with other public and private sector bodies, and if necessary, rejected.
- There will be restrictions on who can file documents at Companies House on behalf of companies, changes to company record keeping requirements, and restrictions on the use of corporate directors.
- There will be new identity verification requirements. All new and existing company directors, PSCs and those delivering documents to the Registrar will need to verify their identity.
What does this mean for companies?
New powers to query, cross check, and reject information
Currently, provided information is properly delivered in accordance with the Companies Act 2006 the Registrar should accept it. In certain circumstances, Companies House does flag up inconsistencies, but this can usually be rectified by the user simply confirming the information submitted is correct.
As a result of the ECCT Act, Companies House will now be able to reject and query new filings as well as existing information on a company’s register where the Registrar considers the information to be suspicious or fraudulent, or they believe that the information may affect the integrity of the register or the wider business. This new investigative power will be more effective now that Companies House will have the power to cross-check any information received with other public and private sector bodies.
Where Companies House query a filing and a company fails to respond to the query or does not provide the information requested, Companies House can impose sanctions on that entity including:
- a financial penalty;
- an annotation on the company’s register.
The ability to reject information goes even further in respect to a company’s registered office. From March 2024, if Companies House do not believe that the registered office of a company is suitable, they will change it to a default address, held at Companies House. If a registered office is moved to the default address, the affected company will have 28 days to provide an appropriate address with evidence of proprietary ownership or Companies House will start the process to strike the company off the register. There is no guidance yet on how this may affect companies who use a business address service, but the new rules mean a company will not be able to use a PO Box as its registered office.
Restrictions on who can file documents
A person will be able to deliver documents on behalf of a company if:
- the person is an officer or employee of the company, or of a corporate officer of the company; or
- the person is an Authorised Corporate Service Provider (‘ACSP’) or an officer or employee of the ACSP.
Any person submitting documents to Companies House on behalf of a company must have had their identity verified and the document they are submitting must be accompanied by a statement confirming their verified status.
From now on a company will only be able to appoint a UK corporate entity as a corporate director. In addition, all the directors of the UK corporate entity will have to be natural persons and those directors must, prior to the corporate director appointment, verify their identity.
Companies with existing corporate directors will be given 12 months to ensure their corporate director complies with the new rules or they must resign them.
Identity verification requirements
Identity verification will need to be carried out for all new, and existing directors, all new and existing people with significant control, and anyone else who can file information at Companies House.
There will be two types of identity verification for company information. Verification can be conducted directly by Companies House, or indirectly through an ACSP.
The consequences for not completing identity verification depends on the circumstances. Where a director fails to verify their identity, they could be disqualified from acting as a director.
If a person is verifying their identity directly with Companies House, identity verification should link a person with a primary identity document, such as a passport or driving licence. The person undergoing verification will take a photograph or scan of their face and the identifying document. The two will be compared, using likeness matching technology, and the identity verified. Alternative methods will be available for individuals without photographic ID and digitally assisted/non-digital identity verification will be available for users who cannot use the digital identity verification system.
Law firms and accountants who provide corporate services that want to continue to file on behalf of their clients will need to be issued with authorised status by the Registrar. To be eligible for authorised status an ACSP the provider must be registered with a supervisory body for AML purposes which means it already has an existing obligation to carry out customer due diligence checks on its clients.
For each filing that an ACSP submits, it will need to confirm to the Registrar that it has completed all the required identity verification checks. The ACSP will also be required to retain records relating to identity verification.
For corporate groups, the use of an ACSP may be the most efficient way of updating and maintaining the register for each company within the group. Without employees or a registered secretary, the task of maintaining the registers of holding and dormant companies within the group will sit with the directors. Directors may already be stretched with day-to-day operations of the group and given the new level of compliance it may be impractical to expect them to be able to manage each register effectively.
For a company, any sanctions imposed on it simply because of poor administrative management would be unfortunate. It is not yet clear how even ‘low-level’ sanctions could affect the business of a company long term. It could be that if a company were to have an annotation on its register this could impact the company’s ability to raise finance, or it may affect its suitability when bidding for a major new contract.
It is time to get your ducks in a row now.
For further information, please contact Kerry Brooks or call 0151 906 1000.