The ECCTA 2023 one year on

Enacted on 26 October 2023, the Economic Crime and Corporate Transparency Act (ECCTA) affects the reporting and registering of company information including all directors and officers, people filing company details with the registrar, and people with significant control over a company.

With the ECCTA, the government addresses three objectives:

• Prevent organised criminals, fraudsters, kleptocrats and terrorists from using companies and other corporate entities to abuse the UK’s open economy
• Strengthen the UK’s broader response to economic crime
• Support enterprise by enabling Companies House to deliver a better service

With such a wide-ranging act, it is not surprising then some provisions are still to be introduced over a year later.

The role of the registrar and promoting integrity of the registers

Perhaps the biggest change introduced by the Act relates to the role of the registrar of companies, Companies House.  Since 4 March 2024, the registrar is now guided by four statutory objectives aimed at promoting integrity of the registers:

• Objective 1 is to ensure that any person who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with).
• Objective 2 is to ensure that information contained in the register is accurate contains everything it ought to.
• Objective 3 is to ensure that records kept by the registrar do not create a false or misleading impression to members of the public.
• Objective 4 is to prevent companies and others from:
  • carrying out unlawful activities, or
  • facilitating the carrying out by others of unlawful activities.

With new statutory responsibilities, Companies House has a duty to check the validity and integrity of its registers.  For the period to March 2025, Companies House has identified six strategic goals which you can read about on Companies House’s blog, here.  These short-term goals are focused on implementing the transitioning required by the Act in readiness for implementation of all the provisions of the Act. These include registering e-mail addresses, appropriate registered office address, inspect details before filing, introduce registration processes for authorised corporate service providers in preparation for identity verification checking.

So, how will these changes be felt?

In the short-term, changes implemented include:

• Registering an e-mail with Companies House, either at incorporation or when filing your company’s first confirmation statement after 4 March 2024.
• Subscribers who incorporate a company must declare that the company is being formed for lawful purposes, and annually, affirm when filing a confirmation statement that all intended activities of the company continue to be lawful.
• Having an “appropriate” address where posted materials can “be expected to come to the attention of a person acting on behalf of the company”. It is worth noting that PO Box addresses will no longer be permitted. Furthermore, Companies House now has the power to change an inappropriate address to a default address (i.e. one that Companies House assigns).
• Companies House can now impose fines where it is “satisfied beyond reasonable doubt, that the person has engaged in conduct amounting to a relevant offence”.
• Delivering misleading or false information is more harshly treated; knowingly delivering misleading, false or deceptive information becomes a criminal offence (where conviction can result in up to two years imprisonment and/or a fine), and delivering misleading, false or deceptive information “without reasonable excuse” is an offence punishable by a fine. The presumption now is that all information being delivered to the registrar is correct, and anything incorrect can face enforcement-related action.
• Increased scope of economic crime offences to include those relating to the general rule against a limited company acquiring its own shares, and prohibited financial assistance (e.g. assistance for acquisition of shares in public companies, and fraudulent trading).

In the medium-term, changes to be implemented are more substantial – in coming months these include:

• Companies House will extend the option to file documents to third-party applications.
• Introduction of an ID verification process for directors, people with significant control, and for persons authorised to file on a company’s behalf.
• Removal of the requirement for a company to hold statutory registers (the ‘company books’) for directors, directors’ residential addresses, secretaries, the PSC register – these details will need to be filed with Companies House and maintained on their registers.
• Standardised names of members and details aligning with how PSC’s details are registered.
• Increased challenge from Companies House on the details filed and enforcement actions to enforce its responsibilities.
• From 1^st September 2025, it has become an offence for a ‘large organisation’ to fail to prevent fraud. Here, to qualify as a ‘large organisation’, two of the three conditions must be met: turnover over £36m, balance sheet total over £18m, and over 250 employees in the year preceding the fraud offence.  If found guilty, an organisation can face an unlimited fine.

Fines – approach to enforcement

With extra statutory responsibilities to promote register integrity and proper reporting, and with greater authority to fine individuals, an increased focus on compliance and enforcement will become apparent.  Companies House has already published its compliance framework, which will consider ‘the level of compliance against the effort that might be needed to achieve it.’ The result of this will be five levels of compliance ranging from a company or individual that demonstrates compliance, through to companies or individuals demonstrating serial non-compliance.

Financial penalties will vary from £250 for a first minor offence escalating to £2,000 for recuring serious offences – the details can be found here.

Still to come and implementation timeline

Implementation plan for Companies House’s implementation of responsibilities under ECCTA (published here).

• Still to be enacted:
  • the removal of the exemption for micro and small companies to file profit and loss accounts. Once enacted, all companies will be required to file their profit and loss accounts.

Outlook and readiness

The first year of ECCTA has focused on preparing the registers and early validity checks, however we expect the ID validation regime to be confirmed soon along with companies’ filings (and omissions) being challenged, which makes more fines seem likely.

Directors need to be aware of their duties when it comes to filing, relevant reporting and registration timescales, and ongoing compliance activities.  As a provider of professional company secretarial and corporate governance services, we are here to help you through these changes.

How we help

The changes of the ECCTA have only just started to be felt, but there are several years of changes to come. As governance professionals, MSP Company Secretarial can guide you through these requirements taking away the stress of filing as people in your organisation change, o ensuring your filings and your reporting is compliant, and working with you to ensure your statutory record keeping is up to date.

For more information about our services and how ECCTA can impact your organisation, contact us to schedule a chat with a member of the team.