Many charity sector leaders will be aware of the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which became law on 26 October 2023.
It introduces reforms to enhance Companies House's powers and constitutes, in the words of the Registrar of Companies, "one of the most significant moments for Companies House in [its] long history".
Trustees and managers of charitable companies, charities with trading companies, and all charities that interact with Companies House in some way need to get their heads around the changes, which are being implemented in stages.
ECCTA also introduces a new corporate offence of failure to prevent fraud (large charities will need to be aware of this), as well as measures relating to money laundering, crypto assets and limited partnerships.
Companies House reforms
The reforms of Companies House are designed to help tackle economic crime and support economic growth, to make corporate entities more transparent and the register more accurate and reliable.
Reforms already in force include:
- Broadening the Registrar's powers to become a more active gatekeeper over company creation and a custodian of more reliable data (using data matching to identify inaccurate information), including powers to verify, remove and decline information already on or submitted to the companies register, and as part of that process the power to annotate the register to warn users of potential issues with the information supplied to Companies House;
- Providing Companies House with greater investigation and enforcement powers, and increasing its ability to share relevant information with law enforcement agencies;
- Many and varied administrative provisions, including those relating to the confirmation statement, company names, registered office addresses, registered email addresses.
Companies House reforms still to be implemented are largely those that require further system development before coming into force, and include:
- Introducing identity verification for all new and existing registered company directors, people with significant control, and those who file on behalf of companies, in order to prevent the register showing false information;
- Enhancing the protection of personal information to protect individuals from fraud and other harms;
- Measures seeking to improve the financial information on the register so that it is more reliable and accurate, reflects the latest advancements in digital technology, and provides streamlined accounts filing options for small companies.
All of these changes will drastically change the nature of interactions with Companies House - we should all expect a transitional, teething period while Companies House and others get used to the changes.
New corporate offence of failing to prevent fraud
ECCTA introduces this offence, which will be committed by an organisation - it could be a large charity - if an employee or agent commits fraud for the organisation’s benefit and the organisation does not have reasonable fraud prevention procedures in place.
The offence only applies to large organisations, which satisfy two of the following three conditions: turnover of more than £36 million; total assets of more than £18 million; more than 250 employees.
Timing for the implementation of the offence is not yet known, but it will not be in force until regulations have been published by the Government.
See here the Government's Factsheets about ECCTA: Economic Crime and Corporate Transparency Act 2023: Factsheets - GOV.UK (www.gov.uk)
And see here the government website dedicated to the changes to UK company law following ECCTA: Changes to UK company law - Changes to UK company law
Shivaji Shiva is partner at VWV, and Gabriel Cohen is a solicitor at VWV.
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