The Economic Crime and Corporate Transparency Act (the Act) introduces a large and complex set of changes to UK company law that will be phased in over the next few years. As well as more than 50 pieces of secondary legislation, implementation will require new operational processes and system updates plus additional staff and significant investment in training. The first set of measures has now been introduced, taking effect from 4 March 2024, and provides Companies House with new and enhanced powers to improve the quality and reliability of its data and tackle the misuse of the companies register. This article outlines the changes introduced and takes a brief look at the changes coming down the track, along with indicative timing. 

Companies House reform: what’s happening and when

New and enhanced powers

The measures introduced on 4 March 2024 are the start of groundbreaking changes for Companies House and have led to 200 new operational processes and examination policies. In her statement, Companies House CEO Louise Smyth remarked “these new and enhanced powers are the most significant change for Companies House in our 180-year history”. As well as greater powers to query information and remove factually inaccurate information from the register, new requirements for registered office addresses, email addresses and a lawful purpose statement have been introduced. 

Registrar’s powers 

As part of the overall aim of improving the accuracy and quality of data on the company register, Companies House now has greater powers to query and challenge information that appears to be incorrect or inconsistent with information held by the Registrar. Where the Registrar is satisfied that the information is inaccurate, incomplete, false or fraudulent, the Registrar is able to remove information from the register. Annotations on the register will be used to let users know about potential issues with the information supplied to Companies House. Companies House is currently prioritising helping those individuals whose details have been used without their consent, working through 7,000 applications to have names and addresses removed.

There will also be stronger checks on company names that may present a false or misleading impression to the public, including the ability to reject an application to register a name in certain circumstances. If, when challenged, a company fails to change its name within 28 days, Companies House now has the ability to determine a new name for the company, such as its registered company number.

Registered office addresses

Under the new measures, all companies must now have an ‘appropriate address’ as their registered office address. In this context, an ‘appropriate address’ is defined as one where:

• documents addressed and delivered to the address would be expected to come to the attention of a person acting on behalf of the company; and 
• delivery to the address can be recorded, therefore enabling an acknowledgement of delivery to be obtained. 

As a result of these changes, PO Boxes can no longer be used as a registered office address; an agent’s address, however, may still be used. As part of this overhaul, Companies House has already contacted 3,800 companies using PO Boxes requesting they update their details.

If a company’s registered address is deemed not to be an appropriate address, Companies House has the ability to change it to a default address held at Companies House. An appropriate address must then be provided with evidence of proprietary ownership within 28 days or Companies House could start the process to strike the company off the register. For those companies already contacted, where they have failed to provide an update, it is anticipated that compliance action will begin in April. 

Confirmation statement: lawful purpose statement and email address

When incorporating a company, subscribers to the company must now confirm that they are forming the company for a lawful purpose. In addition, as part of filing their annual confirmation statement, a company will need to confirm its intended future activities are lawful. Companies will also be required to supply an email address that Companies House can use to communicate with the company. The email address will not be publicly available.

Updated confirmation statement forms should be used for confirmations due on or after 5 March 2024. 

Enforcement and sanctions

Further to the new powers and changes introduced, Companies House has the additional ability to follow up unanswered formal requests for more information with more severe consequences. Initial requests will be in the form of a letter, after which it can escalate to a financial penalty, an annotation on the company’s record or even prosecution, depending on the severity of what is being challenged.

Increase in Companies House fees

Companies House fees are set on a cost-recovery basis; it does not make a profit on the services it delivers. Given the changes outlined above, an increase in its fees is to be expected and new fees will be in place from 1 May 2024 to fund the cost of greater powers and other measures to tackle economic crime. Some of the more notable changes are:

• incorporation fees by post increasing from £50 to £71 and from £10 to £50 when filed digitally; and
• annual confirmation statements filed by post increasing from £40 to £62 and from £13 to £34 when filed digitally.

The higher fees for filing by post compared to online aligns with the planned transition to software-only filing set to be introduced under the Act in the future, along with Companies House’s own ambition to be a fully digital organisation by 2025.

Future changes

ID verification

Identity verification is an important process of ensuring that a person is who they claim to be, commonly evidenced by a person’s passport or driving licence. Companies House will look to introduce compulsory identity verification for anyone setting up, running, or owning a UK company by early 2025. This will help mitigate fictitious individuals being registered and add extra assurance that the information available on the register is genuine and reliable. Verifications will either be done directly with Companies House or through an Authorised Corporate Service Provider (ACSP) registered with Companies House. ACSPs will typically be an accountant, legal adviser or company formation agent registered with a supervisory body for anti-money laundering purposes. It is anticipated that the process of implementing ID verification will begin in late 2024/2025 onwards, with the first step being that the organisations will be able to apply to be ACSPs. This is subject to systems and regulations being in place.

Accounts reform

The final set of measures expected to be implemented will be changes to accounts and filing requirements, which will give company information greater accessibility and transparency. As it aims to modernise and streamline existing processes, Companies House will transition to software-only filing. Small companies will be required to file their profit and loss account and directors’ report and micro-entities will also be required to file their profit and loss account. While these documents will need to be filed with Companies House, they may not necessarily be made public. How, or in what circumstances this might be the case is currently under consideration. With other measures to be introduced first, it is likely that these reforms will not be seen before early 2026. Companies House will publish an implementation timetable to confirm when it plans to go live with each of the measures.”

Stay informed

The Corporate Reporting Faculty will be monitoring developments closely and will keep faculty members informed through its monthly bulletin and other channels. The government also has a Changes to UK company law hub highlighting the changes introduced by the Act.

Fahad Asgar, Technical Manager, Corporate Reporting Faculty, ICAEW