Legal Eagle: The Economic Crime and Corporate Transparency Act 2023

The Government has brought forward further legislation to deliver wider-ranging reforms to tackle economic crime and improve transparency over corporate entities informs Legal Eagle, Nick Gould…

The Economic Crime and Corporate Transparency Act 2023 (the 2023 Act) contains some 220 sections and 13 schedules. But don’t worry, this short note deals with just a few very specific points and is for anyone (i) who owns, or is a director of, a UK registered company or (ii) advises such an organisation or person. It looks at two specific parts of the 2023 Act.

Some of these changes are mentioned below. Some aren’t yet in force, although some are. You should note that although these are all “administrative “changes, they are extremely important. There can be serious penalties for non-compliance.

If you want any more information, let me know.

This is from a UK government press release setting out the background, which you should read to understand what it is all about:

“The UK has one of the world’s largest and most open economies, making it an attractive place for global business. However, this same openness exposes the UK to the risk of bad actors taking advantage, including to perpetrate fraud and money laundering, which, in turn, funds serious and organised crime here in the UK, and facilitates corruption overseas. The threat of illicit finance undermines legitimate business and impacts on everyday society and all citizens’ lives.”

“The Government moved quickly in light of Russia’s invasion of Ukraine to crack down on dirty Russian money in the UK, and other foreign elites abusing our open economy, through the Economic Crime (Transparency and Enforcement) 2022 Act

• It allowed the Government to move faster and harder when imposing sanctions.

• Created a Register of Overseas Entities to help crack down on foreign criminals using UK property to launder money.

• Reformed and strengthened the UK’s Unexplained Wealth Order regime to better support law enforcement investigations.

The Government has now brought forward further legislation to deliver a suite of wider- ranging reforms to tackle economic crime and improve transparency over corporate entities. The Economic Crime and Corporate Transparency Act 2023 will deliver:

• Reforms to Companies House.

• Reforms to prevent the abuse of limited partnerships.

• Additional powers to seize and recover suspected criminal crypto assets.

• Reforms to give businesses more confidence to share information in order to tackle money laundering and other economic crime.

• New intelligence gathering powers for law enforcement and removal of nugatory burdens on business.

These provisions will bear down further on kleptocrats, criminals and terrorists who abuse our financial system, strengthening the UK’s reputation as a place where legitimate business can thrive, whilst driving dirty money out of the UK. How will the Act achieve this? Companies House Reform. The 2023 Act will reform the role of Companies House and improve transparency over UK companies and other legal entities in order to strengthen our business environment, support our national security and combat economic crime, whilst delivering a more reliable companies register to underpin business activity.” 

Here is a summary of the first set of new Companies House powers and requirements (more will follow) with some additional explanations to give you an idea.

Improving the quality of data on our registers From 4 March 2024, greater powers for Companies House to query information, stronger checks on company names, new rules for registered office addresses, and new lawful purpose statements.

The registered office address recorded at Companies House must be “appropriate”. This means that documents sent to the registered office address (i) should come to a person acting on behalf of the company; and (ii) can be recorded by an acknowledgement of delivery. PO boxes will no longer be accepted as registered office addresses.

Companies House has made it clear that it will act against companies which do not have an “appropriate” registered office address. The provisions allow Companies House to change an inappropriate address to a default address. If the company then fails to notify a new and “appropriate” registered office address within 28 days, Companies House may start strike off proceedings.

All companies will be required to provide an “appropriate” registered email address: Companies House will use this email address, which won’t be publicly available, to communicate with the recipient about their company. An email address will be “appropriate” if emails sent to it by Companies House would be expected to come to the attention of a person acting on behalf of the company. Any company incorporated after 4 March 2024 must provide a registered email address upon incorporation. Existing companies will also need to provide a registered email address when they file their next confirmation statement; this will apply to confirmation statements with a statement date on or after 5 March 2024. Companies have a duty to maintain an appropriate registered email address.

Confirmation statement changes: All companies need to confirm that the intended future activities of the company will be lawful. [I don’t really know what to say about this, probably nothing]. You must confirm this every year on the confirmation statement.

Changes to Companies House fees From 1 May 2024, an increase in fees to take new future expenditure into account, as well as making sure costs are recovered from existing expenditure.

Identity verification: Companies House will introduce a new identity verification process to help deter those wishing to use companies for illegal purposes. Anyone setting up, running, owning or controlling a company in the UK will need to verify their identity to prove they are who they claim to be. [Over the coming months, Companies House will explain when these changes will come into effect and how the identity verification process will work. You do not need to do anything yet.]

Changes to accounts: Transitioning towards filing accounts by software only, and changes to small company accounts filing options.

Protecting your information: Individuals will be able to apply to suppress personal information from historical documents and apply to have personal information protected from public view because of risk of harm.

Changes to limited partnerships: Limited partnerships will need to file their information through authorised agents, and they’ll need to file more information with Companies House.

Improving transparency of company ownership: New requirements to provide additional shareholder information, and restrictions on the use of corporate directors.

When the measures come into force, companies must:

• Record the full names of shareholders who are individuals – or the full names of corporate members and firms – in their registers. 
• Provide a one-off full shareholder list so Companies House can display shareholder information in a more user-friendly way. 

Investigation, enforcement and data sharing More effective investigation and enforcement powers for Companies House, and new powers to share data with law enforcement agencies and other government departments.

I suggest this distinct point also ties in with what I have mentioned above.

Register of Overseas Entities: The 2022 Act introduced a new Register of Overseas Entities requiring notification of beneficial ownership information for foreign entities that are registered owners of certain interests in land in the UK. The Register of Overseas Entities came into force on 1 August 2022 and has now been updated by the 2023 Act.

The two principal changes are: (i) it expands the scope of registrable beneficial owners for the purposes of the Register of Overseas Entities, and (ii) increasing additional information that must be delivered to Companies House.

The 2022 Act required a foreign entity holding UK land as nominee for another, to register its beneficial owners with Companies House. Now, if a foreign entity is holding UK land as nominee for another, it will not only have to register its beneficial owners, but also those of the true beneficiary. The 2023 Act also introduced additional requirements related to where a foreign entity acts as trustee in holding UK land.

If you need further advice please send me an email: nick.gould@aria-grace.com / March 2024

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