Giorgio Pizzetti outlines the new Companies House powers in Thomson Reuters

Giorgio’s article was published in Thomson Reuters, 4 March 2024, and can be seen here.

As ECCTA 2023 implementation begins, how can risk and compliance officers prepare for new Companies House powers?

The UK Economic Crime and Corporate Transparency Act 2023 (ECCTA) will introduce unparalleled requirements on companies to formally verify their owners and directors and to ensure the accuracy of their Companies House entries. Risk and compliance officers should monitor the act’s gradual implementation so they can prepare and safeguard their business from regulatory violations.

The ECCTA’s stated purpose is to prevent economic crime, support economic growth and increase the reliability of corporate information held by the register. If these virtuous goals are realised, risk and compliance officers should welcome the shift with open arms. It will allow them to rely on and use, with greater certainty, the publicly available information held at Companies House. Instances of a certain “Mickey Mouse” being appointed as company director will be outdated, with fraudulent or erroneous appointments becoming increasingly rare.

Such a landmark reform will inevitably create a significant amount of work for risk and compliance teams. They will have to implement new internal and external policies and procedures to facilitate compliance. With the first phase targeted to come into force today, March 4, this article discusses the best ways for risk and compliance officers to prepare. Companies will likely be given a reasonable transition period.

Is your Companies House profile accurate?

Companies House now has the power to query, reject, alter and annotate the information it holds about companies, transforming it from a depository of information into an active enforcer of company law. It has also been confirmed that Companies House can deploy these powers retroactively, making all company filings, from incorporation to the present, subject to scrutiny. Additionally, Companies House may impose criminal sanctions and civil penalties for non-compliance.

Little is known about the practical operation of these measures, such as:

• Investigative depth for verifying submitted information.
• Suitable verification evidence.
• Severity of criminal sanctions and civil penalties.
• Grace periods for firms to amend erroneous information before Companies House annotates their public profile.
• Passage of secondary legislation and publication of government guidance will help fill these gaps. Until then, compliance teams should perform a thorough review of their company’s profile and filings at Companies House. The review should span from the company’s incorporation to the present day, ensuring there are no inconsistencies or erroneous information.

If that falls outside the risk and compliance team’s capabilities, firms should strongly consider engaging professional advisers who can suggest appropriate filings and revisions.

Set up the company’s new registered email address

The changes will require companies to supply a registered email address to which Companies House will send all official communications and notices.

While no specific requirements for company-registered email addresses have been issued, there are several factors to consider when choosing an appropriate address. For instance, companies should avoid email addresses linked to a specific employee. If an individual were to change employers, the company would have to file a change. Such a change would be inadvisable because the terminated address would contain all previous communications.

Companies should create a dedicated email address that will be monitored by the risk and compliance team.

Is the company address a PO box?

Companies using a PO box as their office address will have to register an alternative location, as this practice will be banned. While companies may be given sufficient time to arrange an alternative address, initial steps should be taken to comply with this upcoming requirement. Risk and compliance teams should bear in mind that the registered office address need not be the trading address of the company. They can use external secretarial service providers.

Continuing compliance

Risk and compliance officers are crucial for maintaining the stability and integrity of their firms, fostering a culture of compliance and ensuring operations remain within regulatory boundaries. When performed effectively, these roles safeguard the interests of clients, shareholders and the broader financial system.

Risk and compliance teams will need to stay abreast of incoming requirements, which will be introduced incrementally over the next few years. Non-compliance with the ECCTA could result in companies, directors or owners being marked as “unverified” at Companies House, potentially causing reputational damage or problems obtaining credit.

While the law does not extend liability for violations to risk and compliance teams, they will nevertheless be tasked with successfully guiding their organisations and stakeholders through this reform. Secondary legislation and government guidance will hopefully provide clarity on how to prepare for the ECCTA’s full implementation. In the meantime, firms should maintain regular contact with their professional advisers to ensure alignment with any upcoming obligations or requirements.