Following the publication of the business plan for Companies House, we now have a clearer picture of the implementation timetable for some of the key measures contained in the Economic and Corporate Transparency Act 2023.
The Economic Crime and Corporate Transparency Act 2023 (ECCT Act) will, once fully implemented, introduce a broad range of measures to tackle economic crime and, through significant reforms to Companies House, improve the transparency of UK corporate entities.
The measures contained in the ECCT Act are being implemented in phases. Following the recent publication by Companies House of its business plan to March 2025, we now have a clearer picture of the anticipated timetable for the implementation of some of the key remaining provisions during this period.
This briefing note focuses on the key measures companies should take to prepare for the implementation of the upcoming provisions.
Compliance with new measures already in place
Several provisions of the ECCT Act are already in force, and companies should ensure that they are complying with these requirements. Full details of these new measures can be found in our earlier briefing note.
The key new measures for companies are:
- the requirement to have an appropriate registered office address; and
- the requirement to provide Companies House with an appropriate registered email address.
Requirement to have a registered office address at an "appropriate address"
Since 4 March 2024, all companies must have their registered office address at an "appropriate address".
An appropriate address is an address where a document, addressed to the company and physically delivered, would be expected to come to the attention of a person acting on behalf of the company and be delivered.
Companies House has confirmed in its business plan that it will stop the use of PO Boxes (and equivalent services) as registered office addresses by the end of March 2025.
What do companies need to do now?
We expect that most companies will already have an address which meets the requirements of an appropriate registered office address.
If your current registered office address does not meet these requirements, you should ensure that this is put in place. There are no transitional arrangements in relation to this new requirement.
Requirement to provide a registered email address to Companies House
From 4 March 2024, companies need to provide a registered email address to Companies House. This is not made publicly available but will be used by Companies House to communicate with the company.
New companies will need to provide this email address on incorporation. For existing companies, details of their registered email address should be provided at the time of their first confirmation statement filed after 4 March.
The email address must be an "appropriate" email address. This broadly means an email address at which emails sent by Companies House would be expected to come to the attention of a person acting on behalf of the company.
What do companies need to do now?
Existing companies should identify an appropriate email address in advance of their next confirmation statement.
While this could be the email address of a named person, you could also set up a generic email address which can be accessed by a number of people.
Implementation of other key measures
As noted in a government progress report on the implementation of the ECCT Act, the measures already in force are the "first step in a major implementation programme". Our detailed previous briefing note sets out further details of other relevant measures.
While the implementation date for these further provisions remains unclear, companies should be aware of the following anticipated key changes:
- Abolition of the requirement to maintain certain company registers. Following updated filing requirements at Companies House, a company will no longer need to keep its own register of directors, register of directors' residential addresses, register of secretaries, or persons with significant control (PSC) register.
- Requirement for existing companies to provide one-off membership information with its confirmation statement. The ECCT Act will require companies to include fuller information about their shareholders (for example, not using an initial for a member in place for that member's full forename). Once this provision is in force, there will be a requirement for all existing companies to provide a one-off shareholder information statement with their next confirmation statement confirming, for non-trading companies, the full name and number and class of shares held by each member.
New identity verification requirements
New mandatory identification requirements are being introduced for all new and existing directors, PSCs, and those delivering documents on behalf of entities.
These measures are designed to make it harder to appoint fictitious directors or beneficial owners and prevent fraudulent appointments.
There will be two ways to verify an individual:
- directly through a new system to be provided by Companies House (this is still under development, but Companies House has confirmed that it will be available from the end of March 2025); or
- indirectly through a verification statement issued by an authorised corporate service provider (ACSP) which is an intermediary (such as a law firm or accountancy firm) registered with a supervisory body for anti-money laundering purposes.
Companies House confirmed in its business plan that transitional arrangements in relation to identity verification will start at the end of March 2025 (and are expected to continue "throughout Spring 2025 and beyond").
What do companies need to do now?
A significant number of individuals will fall within scope of the new identity verification requirements, and transitional arrangements will be introduced to give existing directors and PSCs time to comply with the new requirements.
While that is the case, there may initially be significant pressure on the new system at Companies House given the number of individuals who will need verification.
To this end, companies may wish to identify, in advance of March 2025, who will fall within scope of the new identity verification requirements.
There will also be a requirement for those filing documents at Companies House on behalf of a company to have their identities verified. Companies may wish to consider at this stage who, within their organisation, will make relevant filings at Companies House, and ensure that their identities are verified once the relevant provisions are in force.
Restricting the appointment of corporate directors
While not forming part of the ECCT Act, a Government factsheet confirmed that provisions in the Small Business, Enterprise and Employment Act 2015 (SBEEA) restricting the use of corporate directors would be brought into force "in parallel" with measures contained in the ECCT Act.
At the moment, as long as one director is a natural person, a company may also appoint corporate directors.
Once the new restrictions are in force, the general principle will be that only natural persons can be appointed as a director of a company. Corporate directors may only be appointed if they fall within scope of an exception to this general restriction.
Regulations setting out the exceptions have not yet been published, but it is expected to follow the "principles based" exception proposed as part of the government's consultation in 2020 on implementing the ban on corporate directors.
Broadly, this means that a company will only be able to appoint a corporate director if:
- the corporate director is a legal entity incorporated or registered in the UK;
- all the directors of the corporate director are natural persons; and
- those natural person directors are verified as part of the new identity verification requirements before the corporate director is appointed to the board.
The exact timing for the introduction of these measures is unclear. In its business plan, Companies House has confirmed that it will "begin development of process changes to impose limits on the use of corporate directors".
As the exception will require the new identity verification procedures to be in place, the earliest date that these measures can be introduced will be March 2025.
For existing companies, there will be a transitional period of 12 months from the date on which the relevant provisions of the SBEE Act come into force, to allow companies to make the necessary changes to their boards to comply with the new regime.
Our previous briefing note provides further details on the corporate director reforms.
What do companies need to do now?
Companies with corporate directors should monitor developments as the legislation becomes finalised and may wish to consider reviewing their current board structures at this stage and identifying whether any current corporate directors will not fall within scope of the proposed exception.
Until the regulations containing the exception have been published, there remains some uncertainty around the final scope of this, and so this review may need to be revisited once the final regulations are in place.
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.
