Giorgio Pizzetti outlines how companies can prepare for ECCTA in the FT Adviser

Giorgio’s article was published in the FT Adviser, 17 April 2024, and can be seen here.

Are you prepared for economic crime act implementation?

In an effort to disrupt economic crime, support economic growth and increase the reliability of the information held in the public register at Companies House, the government has passed the Economic Crime and Corporate Transparency Act 2023 (ECCTA).

The act will introduce unprecedented requirements on companies, including limited liability partnerships and other kinds of corporate entities registered at Companies House, their owners and their directors to verify themselves and ensure the accuracy of the information they provide to Companies House.

The first phase of implementation which came into force on March 4, gave Companies House the power to query, reject, alter and annotate the information it holds about companies on the register.

Prior to the ECCTA, Companies House was required to accept information if it was “properly delivered” and had limited ability to question information that was suspicious or filings that were submitted erroneously or fraudulently.

The new powers mark a landmark shift in the role Companies House will play in regulating the register and influencing the wider business environment.

Companies, directors and owners should be aware that the changes will not only deal with the role of Companies House, but they will also introduce new requirements on companies and LLPs. These will include:

• a requirement for all companies and LLPs to supply a registered email address to Companies House;
• the prohibition on companies and LLPs to use a PO Box address as their registered office address; and
• a requirement for all companies and LLPs to confirm to Companies House on incorporation that they are being formed for a lawful purpose and that their intended future activities will be lawful.

These requirements may seem relatively light touch, but they are only the first steps towards full implementation of the ECCTA, which will radically change the way companies, directors and owners interact and interface with Companies House.

Timeframes to comply with these requirements are expected to be revealed in the near future. Below, I discuss the best ways companies can prepare for this shift.

Are you comfortable with the information the registrar holds about your company?

The ECCTA provides that Companies House can query, reject, alter and annotate the information it holds about companies on the register, but it is not yet clear what this process will look like.

To what extent can Companies House query the information you have filed? How far back on your record can they query? Will Companies House give you the chance to make the necessary changes before it does so itself? How will the annotations appear on your company profile?

These questions are yet to be answered, and the hope is that secondary legislation is passed and government guidance is published to enable companies and their advisers to be better prepared to meet these requirements.

While we wait for such legislation and guidance, the best thing companies, directors and owners can do is satisfy themselves of the accuracy of the information they have provided to Companies House.

Unless your company has the internal resources to review its information at Companies House, it is strongly recommended that businesses consult with their professional advisers who will be able to perform a thorough health check, suggesting any filings, or amendments to existing filings, that should be made.

The changes should be viewed as the perfect time for a spring clean, where you can lift your proverbial carpets and sweep up the lingering dust and dander that had long been ignored.

Failure to do so could result in your company being a guinea pig for the registrar’s initial testing of its newly acquired powers.

Set up your new registered email address

Companies are now required to supply a registered email address to Companies House. This email will be the address to which Companies House will send all official communications and notices and may even be used by other regulatory bodies to contact a company. Currently, only new companies are required to provide a registered email address on incorporation, but existing companies will need to provide this on their next confirmation statement.

While it is possible to provide any email address you so choose to be your company’s registered email address, there are some issues to bear in mind.

It is not recommended that this email belong or be tied to an individual or employee.

Not only can that individual leave the company, resulting in the inconvenience of having to file a change of registered email address, if this address is made visible on your company profile at Companies House, the individual may not want their email address made publicly available and/or it may not be commercially desirable to have an individual’s address as the company’s official email address.

It is recommended that a new email address is created specifically for the purpose of being the registered email address. This should be monitored by the directors/employees who oversee the company’s secretarial affairs.

Do you use a PO Box as your registered office?

If your company currently uses a PO Box as its registered office address, it is urgently recommended that an alternative registered office address is identified as companies will no longer be allowed to use a PO Box as their registered office address.

This change needed to be made by 4 March and companies that do not have an appropriate registered office address could be struck off the register.

Once Companies House identifies an inappropriate registered office address, it will change it to a default address held at Companies House. The company must then provide an appropriate address, with evidence of a link to that address, within 28 days. If the registrar does not receive this evidence, it will start the process to strike the company off the register.

Fortunately, this is a relatively easy change to make and if the procedure set out above has not been initiated, you still have time to change your company’s registered office address and ensure its compliance.

Ongoing compliance

When the ECCTA is fully implemented, we will see Companies House’s authority expanded further, enhanced verification requirements introduced and the institution of criminal sanctions and civil penalties for non-compliance by directors and owners.

Additionally, non-compliance could result in the company, director or owner being marked as ‘unverified’ at Companies House, potentially causing reputational damage or issues obtaining credit.

Concerns have been raised that the requirements imposed by the ECCTA are overly burdensome and could potentially stifle businesses with excessive administrative work and costs. It is hoped that secondary legislation will provide some clarity on how companies, directors and owners can efficiently maintain their compliance.

Nonetheless, it is strongly recommended that companies, directors and owners maintain regular contact with their professional advisers so they can be sure to meet any upcoming obligations or requirements.