Economic Crime and Corporate Transparency Act 2023: changes expected to come into force on 4 March 2024

From Spring 2024 we expect the role of Companies House and the Registrar of Companies (Registrar) to change significantly from simply incorporating companies and being a largely passive information recipient and depository to being a pro-active regulator with clear objectives and the powers to fulfil them.

Changes affecting the ongoing administration of companies and limited liability partnerships are also expected to come into force at the same time. Although no implementing regulation has been published yet, Companies House has announced that the date it is working to is 4 March 2024.

The changes are just a small part of the fundamental reforms being made by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) to processes and procedures at Companies House and to the administration of companies, limited liability partnerships and limited partnerships. These reforms are expected to come into force during the course of 2024 and subsequent years.

This update covers the key changes that have been trailed as coming into force on 4 March 2024 – if this date changes, or if the implementing legislation includes other major changes, we will update you again. For a general overview of ECCTA see our previous update here.

New objectives and an expanded role and powers for the Registrar

The ECCTA establishes clear objectives for the Registrar, including promoting the integrity of the register of information and documents maintained by it (Register) and preventing UK corporates and others from carrying out or facilitating unlawful activities. Companies House has announced that it expects these objectives, and new and enhanced powers to enable it to meet them, to come into force on 4 March 2024.  Once in force, the Registrar will move from simply recording and providing access to the information submitted to it, to being an active gate-keeper and regulator responsible for the reliability of the information collated by it. It will also take an active role in law enforcement through its ability to share information with other public bodies.

The new powers expected to come into force in March include the ability:

• to reject or query documents if they are inconsistent with other information held by or available to the Registrar;
• to remove information in certain circumstances, both unilaterally and following an application by a third party;
• to take active steps to clean up the Register (using data matching tools) and to annotate the Register to highlight discrepancies or inconsistencies to users; and
• to share data with other governmental and law enforcement agencies.

Administrative changes

Requirement for registered office to be at an "appropriate address"

All companies will need to ensure that their registered office is at an appropriate address. This means an address at which a document delivered to the company would be expected to come to the attention of that company and where an acknowledgement of receipt can be obtained. Companies will no longer be able to use P.O. boxes as their registered office address, but can continue to use agents as long as the services provided by such agents satisfy the requirement for the address to be “appropriate”.

Companies using their own premises will need to ensure that there is usually somebody present during normal working hours to acknowledge receipt.

We expect that this requirement will apply from 4 March 2024 (assuming this target date for implementation is met) and the most recent information from Companies House indicates that it will apply immediately for all companies with no transitional period.

Any company currently using a registered office address which does not meet the above requirements should take steps now to change this, or at least identify a new address.

Under new regulations, the Registrar will have enhanced powers to change the registered office of any non-compliant companies to a default address. It will be able to do this either following an application from a third party, or of its own motion, and either with or without giving prior notice. Breach of the requirements is a criminal offence by the company and each officer in default.

CMS CoSec: the good news is that clients who use our fixed fee CoSec service (CoSec Fixed Fee Service) will be able to use our London or Edinburgh office addresses as their registered office address and this will be considered appropriate for the purposes of the new regulations.

New requirement for an appropriate registered email address

Companies will be required to disclose to the Registrar an appropriate registered email address at which, in the ordinary course of events, emails would be expected to come to the attention of a person acting on behalf of that company.

This means the email address will need to be monitored and staff absence and personnel changes catered for. Registered email addresses will not be part of the public record and are intended to enable the Registrar to communicate with companies in a timely manner.

We expect the requirement to apply immediately for all companies incorporated after 4 March 2024, and for existing companies to have to include this on their first confirmation statement due after 4 March 2024. Non-compliance attracts criminal liability for the company and its officers and new companies will not be able to be incorporated without it. 

If a company needs to change its registered email address, it can do so by giving notice to the Registrar. But in order to minimise administration, companies may wish to consider establishing a generic email address for this purpose ([email protected]). Provided the address remains properly monitored, this will remove the need to give notice of a new email address to the Registrar every time there is a staff absence or change of personnel.

CMS CoSec: the CoSec Fixed Fee Service is being updated to include the provision of a CMS company specific email account to satisfy the above requirement. This address will be monitored by the CMS CoSec team in compliance with the requirements of the new regulations, eliminating the administrative burden for our clients. Details of the updated service and applicable fees will be available in due course.

A requirement to confirm a company’s lawful purpose

When incorporating a new company after 4 March 2024, the subscribers will be required to confirm that the company’s purpose is lawful. Every annual confirmation statement given after 4 March 2024 will also need to be accompanied by a statement confirming that the company’s intended future activities are lawful.

Existing and new enhanced false filing offences will mean the Registrar can take action where this proves not to be the case.

Stronger checks on company names

The existing restrictions on company names will be expanded. For example,  there will be  prohibitions on: (i) names intended to facilitate an offence of dishonesty or deception; (ii) names suggesting a (non-existent) connection with a foreign government or international organisation; and (iii) names containing computer code. Some changes will also be extended to business and trading names.

The Registrar will also be given new powers to enforce the changes, including the ability to direct a name change and to remove a company’s name and replace it with the company number. We are waiting for regulations to confirm exactly how this will work.

Limited liability partnerships

We expect the above changes and requirements to apply to limited liability partnerships at the same time as they come into force for companies.

Timing and what to do next

As stated above, although Companies House have announced that they are working towards an implementation date of 4 March 2024 for the changes outlined above, this is the earliest possible date and it is possible that the timing may slip because there are still a number of regulations to be published. We will update you if this is the case.

We expect the new objectives and powers of the Registrar to drive immediate behavioural changes from Companies House. In a recent blog, Companies House made it clear that they will be starting to use their enhanced powers to query new filings, and also information that is already on the Register, with the queries arising from their own investigations or because they have had information from elsewhere which raises questions about the filing or the information that is already on the Register.  Companies House say that they will typically start with a request for more information, and that it is important that this is responded to quickly because if the case escalates to a formal query, the relevant entity will only have 14 days to respond and failure to do so is a criminal offence. In addition, on 19 February 2024, the Government published draft regulations permitting the Registrar to issue financial civil penalties for breaches of the Companies Act as an alternative to pursuing a criminal prosecution. Currently, this method of enforcement is only available for failures to file annual reports and breaches of the newly established Register of Overseas Entities. The earliest this power will come into force is 1 May 2024, but once in force, we expect the Registrar to make full use of this new power to drive enforcement.

UK corporates may therefore wish to use the time before implementation of these changes to tidy up any known gaps or errors in their filing history. Where necessary, registered office changes should be made, and a suitable email address identified for use as the registered email address with Companies House, with appropriate protocols to ensure that such email account is properly monitored.

If you would like to discuss any of the above (including our updated CoSec Fixed Fee Service) with a member of the CMS team,  please speak to your usual CMS contact or email [email protected] and one of our CoSec team members will be in touch.