This week:
- Companies House publishes new guidance on its enforcement and financial penalties powers
- The Bank of England and the Financial Conduct Authority launch their Digital Securities Sandbox
Companies House publishes new guidance on enforcement and penalties
Companies House has published a new policy on how it will use its new and enhanced enforcement powers following changes brought in by the Economic Crime and Corporate Transparency Act 2023. It has also published new guidance on its approach to levying financial penalties.
The enforcement policy notes that Companies House has several options with regard to enforcement, including imposing financial penalties, seeking court orders to secure compliance, launching criminal proceedings and seeking director disqualification orders.
In considering these options, Companies House says it will have regard for economic growth and the impact that its actions are likely to have on businesses, and that it aims for enforcement action to be proportionate to the harm and the seriousness of the breach of law.
The policy provides examples of how Companies House anticipates applying its powers to various circumstances. For example, for entities that are generally compliant but occasionally fail to file on time, it contemplates engaging to provide support and guidance and limiting penalties to fines.
For those that commit more frequent and inaccurate filings, Companies House envisages utilising its querying powers, seeking court orders and prioritising prosecutions for false filings. In serious cases, this may escalate to seeking a director disqualification order, imposing financial penalties or striking a company off.
When considering whether to bring criminal proceedings, Companies House will apply the public interest test set out in the Code for Crown Prosecutors. This includes considering factors such as the gravity and frequency of the offence, any intention to deceive, and the need to deter others.
The financial penalties guidance provides more detail on the process for imposing financial penalties.
Before imposing a penalty, Companies House will issue a "warning notice" stating that it suspects an offence has been committed and giving the recipient 28 days to make representations. It will consider any representations and decide whether to impose the penalty at the end of that period.
The guidance also sets out how Companies House will calculate financial penalties, using the "standard scale" of fines for summary criminal offences. This will yield penalties of between £250 per offence at the least serious end of the scale (for first-time offences) to £2,000 per offence for serious, repeated offences.
A person who receives a financial penalty will be entitled to appeal the penalty by seeking judicial review of the decision to impose it.
Read Companies House's new enforcement policy
Read Companies House's new guidance on imposing financial penalties
Digital Securities Sandbox opens for applications
The new Digital Securities Sandbox has officially opened for applications.
The project, which will be overseen jointly by the Bank of England (BoE) and the Financial Conduct Authority (FCA), will create a modified regulatory framework allowing firms to use developing technology, including distributed ledger technology (DLT), when issuing, trading and settling securities.
The sandbox is open to central securities depositaries (CSD), including those that operate trading venues, to carry out notarial and settlement activities. It extends to a wide range of securities, including equity and debt securities, units in funds, certificates of deposit, and emissions allowances.
To join the sandbox, an applicant must identify regulatory or legal obstacles to using developing technology that prevent them from operating their optimal business model outside of the sandbox.
Once within the programme, participants will progress through a series of gateways that permit them to conduct an increasing amount of activity through the sandbox.
The BoE and the FCA jointly consulted on the sandbox in April this year. (Read our previous Corporate Law Update on the consultation for a digital securities sandbox.)
Following that consultation, the BoE and FCA have issued a policy statement announcing "targeted changes" to their proposed approach. These include extending the sandbox to certain types of non-sterling assets and implementing a more flexible approach to monetary limits for certain kinds of asset within the sandbox.
Read the FCA's announcement on the launch of the Digital Securities Sandbox
Read the regulators' joint policy statement on the Digital Securities Sandbox
Read the regulators' joint guidance on the operation of the Digital Securities Sandbox
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