The Economic Crime and Corporate Transparency Act 2023 (the Act) became law in the UK on October 26, 2023. Among other things, the Act extended the powers of Companies House, the central registrar for companies in England and Wales, to increase the transparency into the affairs of companies and their directors.
Key changes now include identity verification for directors and people with significant control (PSCs), and enhanced powers for Companies House to manage and verify information on the central register. What does this mean for directors and PSCs?
Identity verification
All directors, persons of significant control (PSCs) and registrable legal entities (RLEs) will need to verify their identity by registering via an Authorised Corporate Service Provider (an ACSP). Existing companies will have 12 months from the point at which this comes into force (this date is yet to be confirmed and was postponed from earlier this year). Lenders who file for securities such as legal charges and debentures will also need to comply.
Individuals can use gov.uk one login to verify their identity without the use of an ACSP, however. This can be done via the Gov.uk ID Check app, or for free at your local post office. Each individual will only need to verify once, so directors of multiple companies will not need to verify for each company in which they are appointed.
Failure to Prevent Fraud
Similar to the UK Bribery Act 2010 and the Criminal Finances Act 2017, the Economic Crime and Corporate Transparency Act 2023 introduces another ‘failure to prevent’ offence for companies. However, unlike bribery and tax evasion, fraud is a broader and more complex offence. As a result, the implications of this Act may be more far-reaching than previous efforts to impose criminal liability on corporate entities and their officers.
Reasonable prevention procedures to prevent fraud must be in place as this is the only defence available. It is anticipated that such measures must be implemented by 1st September 2025. The UK Government released guidance on this issue on 6 November 2024. Note that this only applies to “Large Organisations”, being companies with 2 of the following:
- More than £36 million in turnover;
- £18 million in total assets; or
- More than 250 employees.
ESG Reporting
The Act also aims to promote better Environmental, Social and Governance (ESG) compliance. Part of the reporting and requirements include ESG reporting, and so companies may fall foul of the fraud prevention under the act by ‘greenwashing’. It is therefore key for officers to ensure that ESG disclosures are accurate and reliable.
No more P.O. Boxes
There is now a requirement to provide a registered email address on all confirmation statements going forward. In addition, the company’s registered office must be an “appropriate address”. Essentially, this means that any documents sent to that address must expect to be seen by someone acting on the company’s behalf and can be on hand to record delivery. Specifically, this impacts on companies which use P.O. boxes as their registered office, as there must now be a physical address.
Corporate directors
Restrictions on corporate directors are also coming into force. These will prevent any company that is not a UK corporate entity with ‘legal personality’ from being appointed as a director. The directors of any corporate director must be natural persons and have their own identity verified with Companies House.
Software-based accounts filing
All companies will need to find a suitable software product before web-based and paper filing options are no longer available. This won’t be phased in until the next 2 to 3 years, and companies should have at least 21 months’ notice ahead of any changes. Software is already available and a list of gov.uk endorsed suppliers can be found here: https://www.gov.uk/software-company-changes.
Conclusion
The obligations imposed by the Act may feel wide-ranging, but the message is clear: directors must take a proactive, informed approach to compliance. With implementation deadlines approaching — particularly the fraud prevention measures required by 1 September 2025 — now is the time for company officers to review their governance frameworks, update internal processes, and ensure they are ready for the new era of corporate accountability.
