The Economic Crime and Corporate Transparency Act 2023

The Economic Crime and Corporate Transparency Act (ECCTA) received Royal Assent on 26 October 2023. The act amends the Companies Act 2006, introducing new and enhanced powers to UK authorities including Companies House, allowing them to play an important role in fighting financial crime and improving transparency over corporate entities.

Companies House

Some of the most significant measures introduced are for companies registered in England and Wales, in terms of how they will interact and submit information to Companies House.

The first set of changes introduced by the ECCTA came into force on the 4th March 2024. They include:

  • Greater powers to query information and request supporting information;
  • Stronger checks on company names;
  • New rules for registered office addresses;
  • A requirement to supply a registered email address;
  • A requirement for all companies to confirm they’re forming the company for a lawful purpose when they incorporate, and to confirm its intended future activities will be lawful on their confirmation statement;
  • The ability to annotate the register when information appears confusing or misleading;
  • Taking steps to clean up the register, using data matching to identify and remove inaccurate information; and
  • Sharing data with other government departments and law enforcement agencies

Other measures under the Act will be introduced at a later date, requiring secondary legislation and include:

  • introducing identity verification for all new and existing registered company directors, people with significant control, limited liability partnerships and those who file on behalf of companies;
  • introducing restrictions on who can file documents with Companies House on behalf of companies;
  • widening the regulators powers to be a more proactive gatekeeper including the power to decline new companies and powers to check, remove or decline information submitted to, or already received by the regulator;
  • improving the financial information on the register so that it is more reliable, complete, and accurate, reflecting the latest advancements in digital technology, and enables better business decisions;
  • new investigative and enforcement powers. Companies House will be able to proactively share information with law enforcement bodies where they have evidence of anomalous filings or suspicious behaviour;
  • regulations to ensure better protection of personal information provided to Companies House, to protect individuals from fraud; and
  • changing the filing requirements for smaller and micro companies:
  • small companies will now need to file a Profit & Loss account and director’s report.
  • micro entities will need to file a Profit & Loss account.
  • small and micro entities, in certain circumstances will be able to specify that their profit & loss account (or part of the P&L) is not available for public inspection.
  • an additional statement will be required by the directors when a company seeks to rely on an audit exemption (for example, dormant companies). The statement will need to identify the exemption being taken and include confirmation that the company is eligible to take the exemption.
  • more information can be found in the Government’s factsheet, here.

Further information is provided by Companies House here.

Given the scale of the reform, Companies House has also confirmed they will be increasing some of their fees in 2024 to cover the costs of the services they deliver.

Failure to Prevent Fraud

The ECCTA also creates a new Failure to Prevent Fraud offence committed by employees of large organisations (including charities) which benefits the entity concerned. This will apply to large entities which currently meet two out of the following three criteria:

  • more than 250 employees
  • more than £36m annual turnover
  • more than £18m gross assets (this is before the deduction of liabilities)

If resources held across a parent company and its subsidiaries cumulatively meet the size threshold, that group of companies will be in scope of the failure to prevent fraud offence.

Affected entities will be able to avoid prosecution if they have reasonable procedures in place to prevent fraud. The government will publish guidance on reasonable procedures before the new offence comes into force.

You can prepare for the new offence by making sure you are satisfied that you have up-to-date anti-fraud and whistleblowing policies, procedures and measures in place that have been clearly communicated and understood by employees. 

Under the new offence, an organisation will be liable where a specified fraud offence is

committed by an employee or agent, for the organisation’s benefit, and the organisation did not have reasonable fraud prevention procedures in place. It does not need to be

demonstrated that company bosses ordered or knew about the fraud.

Examples of fraud offences within the scope of this legislation include:

  • Fraud by false representation;
  • Fraud by failing to disclose information;
  • Fraud by abuse of position; and
  • False accounting

The government factsheet can be read here.

Other Measures

The ECCTA also includes other measures around:

  • additional powers to law enforcement to seize and recover suspected criminal crypto assets;
  • the strengthening of anti-money laundering powers, including giving entities more confidence to share relevant information; and
  • Limited partnership reform.
Accessing the legislation

The full detail of the ECCTA can be found here.