Changes to Companies House and UK Company Law
The Economic Crime and Corporate Transparency Act 2023 (the Act) has been heralded as the biggest change to Companies House since 1844. In addition, the Act also makes some important changes to UK company law.
The stated aim of the Act is to tackle economic crime, and to improve corporate transparency and the quality of data held by the Registrar of Companies ie by Companies House.
Hitherto, Companies House has been a passive receiver of information. Following the introduction of the Act, Companies House will have greater powers to challenge the information they receive, request further details and remove information from the Register.
The Act will be introduced in phases with the aim being to introduce the first changes from 4 March 2024.
What you need to think about now
From 4 March 2024, when submitting their annual Confirmation Statement, companies will need to provide a registered email address and confirm that that the intended future activities of the company will be lawful.
The email address provided to Companies House will not be publicly available. It is said that the email address will be used to contact companies for information about the company. At present, there are no given guidance on what email address will be accepted i.e. whether it should be for a named individual or a generic email account such as an info@ email account.
It is likely that that will be a matter for each company to address individually but clearly the key is to ensure that you feel comfortable that emails from Companies House will be received and actioned as appropriate and this should inform your decision on the matter.
New companies incorporated on or after 4 March 2024 will need to make the statement and provide a registered email address in order to register.
Future changes
Making filings
Anyone who makes filings at Companies House on behalf of a company, (accountants, company formation agents, legal advisors etc), will need to register with Companies House as an Authorised Corporate Service Provider.
Registered office addresses
New rules for registered office addresses will be introduced which will mean that a PO Box is no longer considered to be an appropriate registered office address. An appropriate registered office address is one where it can be expected that anything delivered to that address will come to the attention of someone acting on behalf of the company. For this reason, it will still be possible to use an agent’s address so long as the expectation can be fulfilled.
Accounts
The intention is to transition towards a software only system for filing accounts over the next 2 to 3 years. Although this change is not being implemented immediately, companies will need to ensure that their accounts are being prepared using suitable software. This is something that may wish to discuss with your accountant or the person who files your accounts before it is no longer possible to make web-based and paper filings.
In a change for small and micro-entity companies, there will be a requirement to file the P&L accounts. Small companies that are not micro entities will also need to file a directors’ report and it will no longer be possible to file abridged accounts.
For any company claiming an audit exemption, the directors will need to make an additional statement on the balance sheet:
· specifying the exemption being claimed; and
· confirming that the company qualifies for the exemption.
Identity checks and shareholder information
As part of the increased commitment to corporate transparency, and in the hope of deterring economic criminals, identity verification checks will be introduced for all directors and People with Significant Control (PSC) upon formation. Retrospective verification checks will also be conducted on existing company directors and PSCs.
The Act is also introducing restrictions on the use of corporate directors. Only UK corporate entities with legal personality can be appointed as corporate directors. The directors of the corporate director must all be natural persons and have their identifies verified.
The introduction of identity verification checks is likely to mean that there is a slight increase in the length of time it takes to incorporate a new company.
Companies will also need to record the full names of shareholders (i.e. forename and surname), or the full names of corporate members and firms, in their registers and to provide a one-off full shareholder list to Companies House.[1]
Where a company’s PSC is a Registered Legal Entity (RLE), companies will be required to state the conditions satisfied to record the RLE as the PSC on their confirmation statement.
Companies House fees
The fees that Companies House charge must cover the costs of providing the service. Therefore, there will be an increase in Companies House fees.
New offence
The Act also creates a new offence – failure to prevent fraud. It is a strict liability offence making an organisation liable if an employee commits fraud for the benefit of the organisation and they do not have reasonable fraud prevention procedures in place. It remains to be seen what will be deemed reasonable procedures.
Crucially, the offence only applies to large companies meaning those with:
· more than 250 employees;
· generating more than £36 million in net turnover; and/or
· holding more than £18 million in net assets.
Comment
Companies House is one of the better functioning government departments. Hopefully they will be able to fulfil their expanded role under the Act without compromising service levels and timeframes.
Companies should already to start to think about the forthcoming changes detailed above and preparing to implement any necessary changes. This might include conducting a review of your current company records and registers (particularly your PSC register) or asking your advisors to assist you in doing so.
[1] Only applies to private companies and traded companies where the shareholders hold at least 5% of the issue shares of any class of the company