The Economic Crime and Corporate Transparency Act 2023: What You Need to Know

The Economic Crime and Corporate Transparency Act 2023 became law in October 2023, marking a significant step towards improving corporate transparency and promoting economic growth in the UK. The Act introduces measures designed to enhance accountability, safeguard personal information and ensure that businesses operate lawfully and efficiently. Here’s an overview of the changes that were implemented on 4th March 2024, along with future reforms which are being introduced in a phased approach.

Key Changes Effective 4th March 2024

There are a number of changes that have already taken effect that businesses may not be aware of.

Registered Office Address: 

One of the major changes is the requirement for companies to maintain an ‘appropriate address’ as their registered office. This address must meet the following conditions:

– Document Accessibility: Any documents sent to the registered office must come to the attention of someone acting on behalf of the company.

– Acknowledgment of Delivery: The address must allow acknowledgement of delivery for documents sent there.

This means businesses can no longer use a PO box as their registered office address. However, third-party agents’ addresses may be used, provided they meet the relevant conditions.

Registered Email Address

Companies will now need to provide a registered email address to Companies House. Importantly, this email address will not appear on the public register, ensuring privacy while facilitating official communication.

Statement of Lawful Purpose

Starting from 4th March 2024, when incorporating a new company, shareholders must confirm:

– That they are forming the company for a lawful purpose.

– That the company’s intended future activities will remain lawful.

This confirmation will need to be included in the company’s confirmation statement.

Future Changes Planned

In addition to the changes already put in place, there are a number of future changes that are planned and which companies need to take into account.

Software-Only System:
Companies House plans to phase out traditional filing methods, including Web Filing and paper submissions, in favour of a software-only system. This transition, expected to take two to three years, aims to streamline account filing processes.

Updates for Small Businesses: Small companies will face new filing requirements, including:

– Clearer filing obligations.

– There is a need to include a profit and loss account and a director’s report in annual filings.

– The option for small companies to file abridged accounts will also be removed, ensuring comprehensive financial transparency across businesses.

– Protection of Personal Information: To prevent the misuse of publicly available   information, Companies House will allow businesses to request the removal of sensitive  data from historical filings. Information that can be concealed includes:

– Home addresses

– Dates of birth

– Business occupations

– Signatures

Identity Verification
By autumn 2025, identity verification will become mandatory for all new incorporations and the appointment of directors or Persons with Significant Control (PSCs). Additionally, existing directors and PSCs will have 12 months to verify their identities during the filing of their confirmation statements. This measure is expected to cover over 7 million individuals.

Accounting rules
Small businesses will no longer be able to file abridged accounts as this will be removed. There will be a requirement for all companies to file profit and loss accounts, irrespective of size.

Summary

The Economic Crime and Corporate Transparency Act 2023 introduces transformative changes for UK businesses, aimed at enhancing transparency, reducing economic crime and fostering trust in the corporate environment. Companies should begin preparing now to ensure compliance with these new regulations. From updating registered office and email addresses to understanding new filing requirements, proactive steps today will help businesses navigate these changes with confidence.

If you need any help with these changes, setting up a new business or ensuring that your current business is compliant, please contact the Hibberts Commercial team.