Labelled as the biggest Companies House shake up in its 180 year history, this new bill brings wide-reaching reforms to Companies House designed to tackle fraudulent activity, economic crime and money laundering.
In this article, our company secretarial manager, Martin Brooks looks at what this means for UK companies, limited partnerships and their partners/directors, and how you can prepare.
What has already changed?
The following changes have now come into force, as of 4 March 2024:
- Registered office address: You must have a registered office address which is deemed “appropriate”. This means it must be somewhere that documents delivered to it would be expected to come to the attention of a person acting on behalf of the company, and that any documents sent to the registered address can be recorded by an acknowledgment of delivery. Companies will not be able to use a PO Box as a registered address, but can use a third party agent address, if they are considered ‘appropriate’.
- Registered email address: Companies will need to provide an ‘appropriate’ email address when they incorporate a company. Existing companies will need to provide an email address when they file their next Confirmation Statement, if it is due from 5 March 2024. Companies will be able to update email addresses online, in the same way they would change the office address. HMRC will use this email address to communicate regarding the company, and it will not be shared publicly. Failure to keep the email address up-to-date moving forwards is a criminal offence.
- Lawful statements: The subscribers (shareholders) of new companies will be required to confirm they are forming the company for a lawful purpose and existing companies will need to make a lawful purpose statement when they file their next confirmation statement.
- Name checks: There will be stronger checks on company names that may give a false or misleading impression to the public. This includes names which include computer code or special characters (such as #, @, &), or are intended to facilitate dishonesty or deception, or which are falsely connected to foreign government and international organisations (e.g. the United Nations).
- Enhanced powers for the Registrar: Companies House will have greater powers to query information that appears to be incorrect or inconsistent on the register. It will be able to clean up the register and remove information they have reason to believe is inaccurate, incomplete, false or fraudulent.
- Directors and disqualification: There is some tightening of the rules relating to the disqualification of directors. A director who is disqualified under the Company Directors Disqualification Act 1986 (CDDA) automatically ceases to hold office and any appointment of that person as a director of a UK company is void. There are also amendments to allow for disqualification of persons designated under UK sanctions legislation. A further new ground for disqualification for persistent breaches of companies’ legislation has not been implemented in this round of changes.
What is still to come?
As part of the ECCT there are expected to be further changes in 2024/2025, however the government hasn’t yet set out a timetable for these. The changes still to come include:
- Additional powers to seize cryptoassets: Companies House will have increased powers to seize and recover suspected criminal cryptoassets. This is potentially coming into force from as early as 26th April 2024.
- New rules for Corporate Directors: (i.e. a company, firm or organisation or non-natural person, appointed as the director of a company) Corporate directors of UK companies will no longer be allowed unless they satisfy an exemption, which requires: a) the corporate director to be incorporated in the UK and have only natural persons (whose identities have been separately verified) on its own board; and b) there to be at least one natural director sitting alongside the corporate director (which mirrors existing law). Also there can be only one “layer” of corporate director. Multiple corporate directors running up and down groups of companies will not be permitted.
- Identity verification: will be requiredfor all new and existing registered company directors and Persons with Significant Control (PSCs). A director will not be able to act as such unless they have verified their ID (and the appointing company needs to ensure verification or also be at risk of committing an offence).
- Companies House checks: There will be further scope for Companies House to cross-check data with other public and private sector bodies, and proactively share information with law enforcement bodies.
- Failure to prevent fraud: A failure to prevent fraud offence and the extension of corporate liability will be introduced for all economic crimes committed by a company’s senior manager. This will make companies and partnerships liable for failing to stop employees, agents or subsidiary undertakings committing fraud for the benefit of the organisation or its customers.
- Small and micro entities will no longer be permitted to file abridged or filleted accounts. Micro-entities (businesses with fewer than 10 employees and a turnover of less than £632,000) will only need to file a balance sheet while companies with fewer than 50 employees and a turnover under £10.2m must file a balance sheet, directors’ report and profit & loss account. This change will mean that their financial performance, including gross profit will be available in public records, potentially putting some at a disadvantage in negotiations etc. The only remaining filing exemption is that micro-entities may remove their Directors’ Report from the filing copy.
What if you don’t comply?
Failure to comply with the new rules may lead to penalties and could lead to a criminal offence for partners / directors. In addition, the Registrar may deregister entities that do not comply with the new requirements.
When should I start thinking about this?
Given the wide array of changes, there may be Companies House operational issues and hurdles that companies need to overcome, we would therefore urge directors to give this immediate focus if they have not yet done so.
Our company secretarial team are familiar with the new requirements and will be happy to arrange a consultation to discuss specifically how your business will be impacted. Please contact us to arrange a consultation.
Four ways you can prepare
Since some of these new requirements may require significant time and resource to resolve, we advise reviewing starting early so that you are ready to take action as soon as the legislation comes into force.
Here are four ways to begin preparing for these changes:
1. Make sure your registered company information is accurate
You should check that your company information is complete and accurate and make sure that any inconsistencies are swiftly rectified.
There will also be new details that you need to provide such as a non-public email address for communication and a registered address to which documents can be delivered.
Check where your company is registered, as you must have a registered office address which is deemed “appropriate”. This means it must be somewhere that documents delivered to it would be expected to come to the attention of a person acting on behalf of the company. A registered office service with a mail forwarding facility, such as the service we offer will meet this requirement.
2. Prepare your directors and Persons with Significant Control (PSC)
Prepare your directors, PSCs and presenters for ID verification – so that when the process is finalised and live, they are ready to verify their ID.
What will be required:
- All new directors appointed must be verified by photo ID, either directly via Companies House or indirectly through an authorised intermediary, such as ourselves.
- Existing directors will also have to verify their IDs in the same manner, but there will be a transition period to do so (this is expected to be by the time of filing the company’s first confirmation statement once the provisions of the Bill are in force).
- This ID verification requirement may also extend to non-UK companies with an “establishment” in the UK.
You can begin to prepare your company by communicating with your directors, PSCs and presenters to make them aware that this will soon be a requirement.
We expect the ID verification process will be via a Companies House link to take a digital photo, combined with uploading a scan of your passport. This process will be handled by the individual themselves, or our team can handle this for them as your authorised intermediary.
Non-compliance will be a criminal offence and could potentially result in a fine or sanctions for the relevant individuals, as well as to the UK entity, involved.
Individuals will be able to ask for additional personal information to be suppressed from the Companies House public record such as signatures, full dates of birth, former names, residential addresses, and professions.
3. Review your company structure
Here is a list of items to review regarding your company structure:
- Review the registered name/s of your entities to check that no computer code or restricted special characters are used;
- Review your structure (particularly where there is a group of companies) to identify any corporate directorships and map out changes to these that might be required (for example to remove any “layering”).
- Review each group company’s register of members, directors and shareholders to ensure no abbreviated names are used.
- Consider what exemption evidence and eligibility statements will need to be provided (for dormant companies, small companies, micro-entities, and PSCs particularly).
- Consider how best to prepare for iXBRL digital formatting and the balance sheet, profit and loss account and directors’ report requirements.
- Consider what your “appropriate e-mail address” and “appropriate address” will be.
4. Decide how you will manage and resource more thorough filing and record keeping requirements
With these changes on the horizon, you may simply feel that it is an added distraction away from your day-to-day business activities that you don’t need.
We would be happy to discuss how we can act as your agent, keeping track of when the changes are coming into place, making sure that you are ready in good time and handling the new filing requirements on your behalf.
How can we help you?
We have been discussing with our clients individually how they are impacted and how our company secretarial team can help. We can also assist in reviewing corporate structures and providing support with restructuring if deemed appropriate.
If you would like to discuss appointing our experienced company secretarial team to handle your Companies House filing requirements or for a no obligation quotation, please do get in touch with us.
Martin has worked in the company secretarial field for over 30 years and holds the ICSA Certificate in Company Secretarial Practice and Share Registration Practice.