ECCTA 2023: How will this affect my company?
The Economic Crime and Corporate Transparency Act 2023 (‘ECCTA’) is the most significant reform to Companies House since its formation in 1844 and brings with it many changes that will affect companies across the UK. In this blog, we will delve into three of the key provisions introduced by ECCTA 2023 and the impact that they will have on your business:
New Corporate Offence: Failure to Prevent Fraud
ECCTA created the new corporate offence of failure to prevent fraud that applies to all entities which fall under the definition of ‘large organisations’ as outlined in the Companies Act 2006.
The new offence intends to strengthen the liability of large entities (who may have been able to avoid prosecution in the past) and encourage such entities to ensure the preventative procedures that they have in place against fraud are sufficiently robust.
To avoid prosecution, a large company will need to be able to demonstrate that they have reasonable procedures in place to prevent fraud. Failure to fulfil the required standard could result in an unlimited fine being imposed at the court’s discretion.
Obligatory Identity Verification
ECCTA requires that anyone acting on behalf of a company will need to verify their identity before they can file information with Companies House, this includes all directors and People with Significant Control (PSCs). You will be able to verify digitally or through non-digital methods, either directly with Companies House or through an Authorised Corporate Service Provider (ACSP). Once you have been verified, you will have a single user account with any of the roles you hold being linked to that one account.
Should a director refuse to verify, they, and the company, are committing an offence under s43 of ECCTA. This will need to be considered by companies when appointing a new director, or when identifying a PSC following a transaction, as to be registered they must first be verified.
Changes to Companies House powers
The intention for the changes to Companies House is to improve data reliability, improve transparency and to deter money laundering and fraud.
Under ECCTA, the new powers include, but are not limited to:
- requiring those forming or running companies to supply additional information. The Registrar may compel a person to supply further information to determine whether they will accept a filing
- removing material from the register;
- proactively sharing information with law enforcement bodies, regulatory bodies, supervisory bodies, and other public authorities, either to assist in the Registrar’s function or the function of who is receiving the information;
- requiring companies to confirm that they are forming the company for a lawful purpose on incorporation, and to confirm that the future activities will be lawful on their annual confirmation statement;
- requiring a company to maintain an appropriate email address (which will not be available for public inspection); and
- better enforce the use of appropriate registered office addresses, with PO boxes being unacceptable.
What do I need to do now?
Whilst the measures brought about by ECCTA are still to be fully implemented, there are some provisions that have already come into force which will be explained in our next blog post. It is expected that the relevant infrastructure and software will need to be developed for full implementation of the legislation, for example, software will need to be developed to implement the identity verification process.
To keep updated with the ongoing changes to company law, we recommend you check the government website, ‘Changes to UK Company Law’, which is regularly updated with new measures coming into effect, the link to which can be found by clicking here.
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