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27 March 2024

Company Law And M&A - Insights For In-house Counsel | Spring 2024

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Travers Smith LLP

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It’s not just law at Travers Smith. Our clients’ business is our business. Independent and bound only by our clients’ ambitions, we are wherever they need us to be. We focus on key areas of work where we are genuinely market leading. If it’s hard – ask Travers Smith.
As we reported last autumn, all UK business organisations will be impacted by the Economic Crime and Corporate Transparency Act 2023 ...
UK Corporate/Commercial Law
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ECCTA: what's the latest?

As we reported last autumn, all UK business organisations will be impacted by the Economic Crime and Corporate Transparency Act 2023 (ECCTA), a significant new piece of companies' legislation designed to clamp-down on the misuse of corporate entities in the UK, which passed into law in October 2023.

Key changes include:

  • extensive new powers for Companies House to check, query, remove or decline information submitted to, or already on, the companies register and share information with law enforcement bodies, where appropriate;

  • changes to the rules for registered office addresses and a new requirement for a registered company email address;

  • enhanced measures to improve the quality of financial information on the register;

  • new compulsory identity verification for all new and existing registered company directors, PSCs, LLP members and those delivering documents to the Registrar; and

  • greater protection of personal data on the register to protect individuals from fraud.

The implementation of ECCTA is being staggered. The first ECCTA-related measures came into force on 4 March. Our briefing Economic Crime and Corporate Transparency Act 2023 - what to do now | Travers Smith sets out which provisions are already in force and what businesses need to do now to get ahead on ECCTA.

ECCTA: new failure to prevent fraud offence

ECCTA also introduces a new corporate criminal offence for failure to prevent fraud. This landmark new offence has been in the offing for many years and is modelled on the failure to prevent bribery offence under the Bribery Act 2010. Although the new offence isn't in force yet, large UK businesses should be looking to strengthen their governance arrangements now in preparation for the new offence coming into force later this year.

'LARGE" MEANS

250
(i) more than 250 employees
£36m
(ii) more than £36m turnover and/or
£18m
(iii) more than £18m assets

Fraud, for these purposes, extends to fraudulent accounting, fraudulent trading and false statements by directors. Liability for the new offence may arise where an employee or agent commits fraud for the benefit of the organisation and the organisation did not have reasonable fraud prevention procedures in place. Furthermore, liability (with potentially an unlimited fine) can attach to:

  • the group company directly responsible for failing to prevent the fraud; or

  • the UK parent company, even if the relevant subsidiary/employee is based overseas and the fraud took place without the knowledge, consent or connivance of the UK parent.

Guidance on what those procedures should look like is expected from the Government before the offence comes into force, expected to be in late 2024.

For more on ECCTA, read Getting tough on corporate abuse: the Economic Crime and Corporate Transparency Act passes into law | Travers Smith.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
27 March 2024

Company Law And M&A - Insights For In-house Counsel | Spring 2024

UK Corporate/Commercial Law

Contributor

It’s not just law at Travers Smith. Our clients’ business is our business. Independent and bound only by our clients’ ambitions, we are wherever they need us to be. We focus on key areas of work where we are genuinely market leading. If it’s hard – ask Travers Smith.
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