Forthcoming changes to Company Law – what you need to know

Written by Edward Coxall, Partner at Mayo Wynne Baxter.

The Economic Crime and Corporate Transparency Act 2023 was passed at the end of last year and is the Government’s response to tackle the use of the UK’s corporate and business sectors for criminal activities, building on legislation introduced in 2022, following Russia’s invasion of Ukraine. If you have read the word “crime” and thought this doesn’t apply to you, then please read on!

The legislation aims to deliver reforms on tackling economic crime and improving transparency over corporate entities to drive confidence in the UK economy. One of the key aims is to improve the accuracy and quality of the data on the UK’s public registers, which it will do by introducing several changes to Company Law over the next few years.

As one might expect from the title of such an Act the changes are diverse, but this article will focus on those changes affecting all corporate businesses, the first of which will be introduced from 4th March 2024.

To improve the quality of data there will be greater powers for Companies House to query information, stronger checks on company names, new rules for registered office addresses, and new lawful purpose statements:

• the Registrar will have greater powers to query and challenge information that appears to be incorrect or inconsistent with information held and if a company does not respond to a formal request from Companies House for more information there will be new powers to:

          • impose financial penalties.

          • annotate the company’s record.   

          • bring prosecutions.

• an identity verification process will be introduced for new companies, such that all directors and people with significant control (PSCs) will need to verify their identity using ID documents. 

• stronger checks on company names which give a false or misleading impression to the public will help to improve the accuracy and quality of the data held and help to tackle the misuse of company names.

• companies must, at all times, have an ‘appropriate address’ as their registered office which is one where documents sent to the registered office should be expected to come to the attention of a person acting on behalf of the company,

• and can be recorded by an acknowledgement of delivery. Thus, PO Boxes will no longer be acceptable. If a company’s registered office is not appropriate, Companies House will be able to change it to a default address, held at Companies House.

• all companies will need to provide a registered email address which will not be available to the public, but which will be used by Companies House to communicate with the company. New companies will need to give a registered email address when they incorporate and existing companies will need to give a registered email address when they file their next confirmation statement, with a statement date from 5 March 2024 onwards. 

• when incorporating a company, the subscribers will need to confirm they are forming the company for a lawful purpose and a company will also need to confirm its intended future activities are lawful, on the annual confirmation statement.

The filing of accounts by software only will be phased in over the next 2 to 3 years and all companies will need to find suitable software before web-based and paper filing options are no longer available. The accounts filing options for small and micro-entity companies are changing and they will also need to file their profit and loss accounts. Small companies that do not qualify as micro entities will also need to file a directors’ report. Finally, any company claiming an audit exemption will need to give an additional statement from their directors on the balance sheet specifying which exemption is being claimed and confirm that the company qualifies for the exemption.   

The Act will also seek to make company ownership more transparent with measures which will require companies to:

• record the full names of shareholders who are individuals – or the full names of corporate members and firms – in their registers.

• provide a one-off full shareholder list so Companies House can display shareholder information in a more user-friendly way.

There will also be restrictions on the use of corporate directors and only UK corporate entities with ‘legal personality’ will be able to be appointed as corporate directors. The directors of these corporate directors must be natural persons who must verify their identity under the new procedures for identity verification.

Finally, to fund the cost of the powers and reforms in the new Act, Companies House fees will be increasing in 2024.

Further details can be found at Changes to UK company law

Ecoxall@mayowynnebaxter.co.uk