Update on the Economic and Corporate Transparency Act 2023 and its impact on company law

The Economic Crime and Corporate Transparency Act 2023 (ECCTA), which received Royal Assent last October, aims to prevent the abuse of UK corporate structures and tackle economic crime.

ECCTA provides for a series of reforms that will be coming into force in stages due to their extensive nature, giving companies the necessary time to prepare and adapt to the changes.

The first substantive changes came into force in March 2024, with the most important ones being as follows:

1. All companies must have an appropriate address at all times (registered office address) and, while this can still be a third party agent’s address, a PO Box is no longer regarded as an appropriate registered office address.
2. All companies are now required to provide a registered email address when they are incorporated or, for existing companies, upon filing their next confirmation statement. The email address will not be publicly available and an agent’s email address can be used, as long as a director or the company secretary is notified of any correspondence received on the registered email address.
3. The initial subscribers of any new company in the process of incorporation will have to confirm that it is being formed for a lawful purpose and existing companies will be required to confirm their lawful purpose on their next confirmation statement.
4. Companies House now have greater powers to query information provided and request supporting evidence. Stronger checks will also be conducted on chosen company names upon incorporation and Companies House will have the right to query and/or reject applications on the basis that the name is misleading.

The second stage of the reforms involved Companies House raising its company incorporation and registration fees. A list of the updated Companies House fees can be found here.

The next stage of anticipated changes involves rules for directors, persons with significant control (PSCs) and others who will be required to verify their identity. Companies House has published draft rules regarding the identity verification process, suggesting that the new rules could be expected to be brought in fairly soon.

The main aim of the new identity verification process is to prevent any fraudulent director appointments, whether upon incorporation or when appointing additional directors in a company, and stopping any false information from reaching Companies House.

It is expected that Companies House will put in place a service for the relevant people to verify their identity using ID documents, such as a passport. Authorised agents will still be able to incorporate companies and directors and PSCs will be able to verify their identity through specific categories of authorised agents (such as solicitors, accountants and company formation agents) who are already under an obligation to carry out similar checks on their clients.

We will continue to monitor the implementation of the reforms and any further updates published by the Government, Companies House, the Department for Business and Trade and any other relevant bodies and we will provide further updates in due course.