The Economic Crime and Corporate Transparency Bill (“the Bill”) is part of the UK Government’s efforts to combat fraud and money laundering through corporate structures. It aims to enhance the integrity of information held by Companies House regarding UK companies. The Bill is currently progressing through the House of Lords and is expected to receive royal assent in Spring/Summer 2023.
An overview of the key themes and implications of the Bill are as follows:
Key Themes
- Expanding Companies House’s Role and Powers
To address inaccurate data and improve information integrity, the Bill seeks to transform Companies House to an active monitor of company incorporations and reliable corporate data. Companies House will have new powers to reject and query inconsistent filings, require additional information, resolve inconsistencies, and remove previously accepted information. It will also be able to disclose information to law enforcement agencies and impose financial penalties for breaches.
- Identity Verification and Data Sharing
The Bill introduces formal identity verification measures for company directors, persons with significant control (PSC), and individuals delivering documents to Companies House. These measures are aimed at preventing anonymous filings and hiding interests in UK companies. Companies House will facilitate the sharing of data with law enforcement agencies and others to aid in the fight against illegal activities.
- Protection of Personal Information
Recognising the importance of safeguarding personal information, the Bill includes provisions for more robust measures to protect the personal data held by Companies House. This is crucial to minimise the risk of false or misleading impressions and ensure the privacy of individuals associated with UK corporates.
- Improvement of Financial Information
The Bill aims to enhance the quality and usefulness of financial information provided to Companies House. It introduces simplified filing requirements for micro-entities and small companies, streamlining the process while ensuring accurate reporting. A new criminal offence is created to deter the submission of false, deceptive, or misleading filings or statements.
Implications for UK Corporates
- Company Registers
The Bill revokes the option for UK companies to store their register of members on the Companies House central register. Instead, companies will need to maintain their own register of members, including full names and addresses of members. Changes in member and officer information must be promptly notified to Companies House to ensure accurate records.
- Verification of Directors and Officers
The Bill introduces formal identity verification requirements for directors, secretaries, and individuals acting on behalf of UK companies when delivering documents to Companies House. This verification will need to be completed either directly with Companies House or through an authorised corporate services provider. Failure to comply may result in criminal sanctions or civil penalties. Companies must ensure that directors’ identities are verified before their appointment is confirmed.
- Verification of Persons with Significant Control (PSC)
The Bill introduces verification requirements for individuals who are persons with significant control (PSC) or relevant officers of corporate entities that hold significant control in UK companies. Although existing PSCs and relevant officers are not immediately required to verify their identities, future regulations will set a deadline for compliance.
- Financial Reporting and Accounts
Micro-entities will need to file a balance sheet and a profit and loss account, while small companies will also have tofile a director’s report. False, deceptive, or misleading filings or statements will be considered an aggravated criminal offense.
This is likely to cause the most concern, especially to a single owner-managed business, as profit and dividend levels will now be on public record. As a small business owner, you may wish to consider changing the way in which you are remunerated, for example taking salary over dividends, particularly given the changes in dividend rates, dividend allowances, and corporation tax rates as that way the reader will have less insight into your personal income as it will be included within an administrative expenses total on the profit and loss statement.
The Economic Crime and Corporate Transparency Bill introduces significant reforms to enhance the integrity of corporate structures and combat economic crimes. After royal assent, some measures will require secondary legislation, allowing for a grace period before full implementation. These changes will impact corporate compliance and legal activities and we will publish an update once the Bill has been passed, as amendments could be made and timings are not clear.
Please do speak to your usual contact at RG for advice and assistance in the meantime, or indeed any other matter that you may need assistance on.