The Economic Crime and Corporate Transparency Act 2023 (ECCTA) received Royal Assent in October 2023 and marked a pivotal moment incorporate governanceand transparency.Louise Smyth, Chief Executive and Registrar of Companies, stated "This is one of the most significant moments for Companies House in our long history".
The ECCTA's main objective is to prevent abuse of UK corporate structures and address economic crime. It introduces significant changes to the regulatory landscape, emphasising transparency, accountability, and prevention of economic crime. These changes do not just impact large listed companies but have civil and criminal ramifications for all directors of any company incorporated in the UK, as well as all corporate entities, such as limited liability partnerships. The first set of changes brought by the Act came into force on 4 March 2024. This is the first article in a series exploring these and future changes.
The changes
- The Registrar of Company's new objectives
The Registrar of Companies must seek to promote four statutory objectives to enhance the accuracy and integrity of information on the register. These objectives fundamentally transform Companies House (CH) from a passive recipient of information to a more active gatekeeper.
Objective 1:Ensure that any person required to deliver documents to the registrar does so, and that the requirements related to proper delivery are complied with.
Objective 2:Ensure that information contained in the register is accurate and complete, meaning the register contains everything it ought to contain.
Objective 3:Minimise the risk of records maintained by the register creating a false or misleading impression for the public.
Objective 4:Minimise the extent to which companies and others engage in unlawful activities or facilitate such activities by others.
CH will now base its decisions on these objectives.
- New registered office and registered email address rules
The registered office of a company must at all times be an 'appropriate address'. Documents addressed to the company at the address and delivered by hand or by post would be expected to come to the attention of a person acting on behalf of the company, and delivery of documents there should be capable of being recorded by obtaining an acknowledgement of delivery. PO Boxes cannot be used as registered office addresses. Companies can still use a third party agent's address if it meets the conditions for an appropriate address.
Most significantly, CH can change the registered office of a company, either on its own motion or on an application, if it is not satisfied that the registered address is an appropriate address. CH also has similar powers to require a change of an organisation's service address, if this is not an address at which documents may be effectively served on a person.
For the first time ever, a company must now have an 'appropriate email address', which will be used by the registrar for its communications. Emails sent by the registrar to this email address would be expected to come to the attention of a person acting on behalf of the company.
All companies being formed will now have to provide an appropriate email address on their formation application, and all incorporated companies will need to file such an email address with their next confirmation statement. Any change of the email address should be notified to CH.
There is no requirement for this email address to be made public, so it can remain confidential, only for CH use, which is preferred to avoid potential hacking of the email account.
- Companies to deliver a 'lawful purpose' statement
All companies incorporated in the UK must confirm on their confirmation statement that their future activities will be lawful. When incorporating a new company, the shareholders will not need to include a statement in their application for registration expressing their intention to form the company for lawful purposes.
The ECCTA's far-reaching impact on corporate governance and transparency is undeniable. The heightened transparency is something to applaud on one hand, as it aims to minimise wrongdoing and act as a safeguard against economic crimes, but on the other hand, there may be concerns about the potential administrative burdens on businesses and the need for a delicate balance between regulatory oversight and corporate autonomy. Further, more significant changes will be explored in further articles in this series. For more information, or assistance generally, please contact our Corporate teamhere.
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