Pretty much all you thought you knew about how Companies House operates, is changing.  It’s big, and it’s been little remarked upon, extraordinarily. Some of it has already changed, and it’s about to accelerate.

What is the Economic Crime and Corporate Transparency Act?

The headline is a change in the role of Companies House from record keeper to gate keeper – from filing what you send in, to checking, verifying, rejecting and penalising for getting it wrong or getting it late.  This all follows on from the Economic Crime and Corporate Transparency Act 2023 and it’s going to get a lot more painful than what went before.

It started with the Economic Crime (Transparency and Enforcement) Act 2022, which provided for the registration of overseas entities which hold property in the UK.  This was rushed in when the extent of Russian ownership of property in the UK became a major issue; previously accepted (welcomed, even), and then with sanctions, a big problem.

What changes are already in force?

Some easy changes under the 2023 Act have already happened. You may not have noticed them, but the powers of the registrar to investigate and enforce have been beefed up; and powers to share data with law enforcement agencies and other government departments have been increased. These happened from 4th March 2024.

What are the Companies House reforms for March 2024?

Allied with these were deeper powers to query information filed, to check company names, to ensure that registered office addresses are addresses when information will genuinely come to the attention of the companies, and a requirement for companies to register email addresses. When you file a confirmation statement, you now must make a statement that the company is incorporated for a lawful purpose.   The clue here is in the title – Economic Crime.  The UK has been a soft touch for criminal enterprises, and there are now a series of tripwires and powers making that more difficult, for more offences to be pursued, and more penalties to be levied.  They are there to deter and catch the criminals – though we suspect that the immediate effect will be to catch out small businesses with limited resources to be aware of and respond to the changes. 

The changes and powers will cost more to administer – from May 2024 the Companies House fees increased by a factor of 2 – 3. Not two thirds but doubled or tripled.

How has the role of Companies House changed?

Previously, anyone could register for a company at Companies House,  and some filing was badly defective; but not checked, because that wasn’t the role of Companies House.  

Filings and registrations have historically been done often without significant charge, as part of their ongoing retainers, by certain service providers. However, in the spring of this year this will tighten up. A new role, that of Authorised Corporate Service Providers  (ACSP), will apply, and those qualifying will need to be registered for Anti Money Laundering purposes with a supervisor in the UK. Typically company formation agencies, solicitors, accountants and governance professionals will apply to be registered, and they will play a key role in verification – one of the biggest elements of the new legislation.   Others will still be able to file (but not verify) until autumn 2026, but from then they too will need to verify their own identity.

By autumn 2025 electronic identification will be compulsory for directors and persons with significant control (PSCs) on incorporating companies  or become  new directors or PSCs.    This will have to be done either by Companies House’s own systems, or by the ACSPs.  It’s not going to be a case of completing an online form and you’re in – ID will have to be provided, verified and checked.  In spring of this year it’s intended that the ability to do this voluntarily will start.

Existing directors and PSCs will also be caught up in this during the twelve-month period from autumn 2025 to autumn 2026, because on the first filing of a confirmation statement from autumn 2025,  those who are directors of PSCs already will need to provided verification of identity. There’s more too:

• Fuller information of shareholders will have to be filed at Companies House
• Financial penalties for failing to file confirmation statements
• Penalties not just on companies, but on their directors individually, for inaccurate and false filings, will be levied – more cost, more frequency. Companies House have published this guidance to explain its approach to enforcement.

What do corporate transparency changes mean for individuals?

There are though greater protections for individuals, allowing, for instance, for application to be made for suppression of registered office addresses where it’s an individual’s home address, as well as signatures, business occupations and dates of birth (they will still all be held, but not publicly available).

How can my business comply with the Economic Crime and Corporate Transparency Act?

For well-resourced companies with company secretarial function, this will be a doable change. For perpetrators of economic and corporate crime, life will get harder. But for smaller businesses   it is bound to be a shock, significant expense and require ongoing vigilance, as well as the likely cost of frequent fines.  It’s necessary, no doubt, but it’s not going to be welcome.