In February we reported on a number of changes to the Companies Act 2006 ("CA 2006") which came into force on 4 March 2024. However, the Economic Crime and Corporate Transparency Act 2023 ("ECCTA 2023") contains more changes which have yet to come into force and this article focuses on those. It is important to note at the outset that we do not yet have any indication as to when these changes will be brought into force.
Identity verification
ECCTA 2023 introduces a requirement that all new and existing company directors, persons with significant control, 'relevant officers' of relevant legal entities ("RLEs") (see below) and individuals who are Authorised Corporate Service Providers ("ACSPs") (see below) must verify their identities i.e. confirm they are who they claim to be.
The requirement will also apply to any individual (other than a person acting in their capacity as an employee of an ACSP) who wishes to file documents at Companies House (see below).
There will be two methods of identity verification. The first is direct verification via a system to be put in place by Companies House. As yet we do not know the full details of the system but it is likely to involve the individual uploading a picture of their face and a form of identification such as a passport or driving licence. The second method is verification through an ACSP.
ACSPs
ACSPs will be able to file documents on behalf of companies and also verify the identities of individuals.
It is envisaged that ACSPs will be intermediaries such as lawyers, accountants and company formation agents.
An individual or entity can be an ACSP providing:
- in the case of an individual, their identity is verified;
- they are registered with a supervisory body for anti-money laundering purposes and already have an obligation to carry out customer due diligence checks on their clients; and
- they register as an ACSP with Companies House.
Providing they are acting in the course of their employment, employees of ACSPs will be able to file documents on behalf of the ACSP's clients without the need for the employee to have their identity verified.
Filing at Companies House
ECCTA 2023 will introduce restrictions on who can file documents and other information at Companies House.
Providing their identity has been verified, an officer or employee of a company will be able to make filings on behalf of that company. ACSPs will also be able to make filings on behalf of companies.
A person who is disqualified under the directors' disqualification legislation will not be able to file documents other than through an ACSP.
Directors
No new directors will be permitted to act unless and until their identity has been verified. Companies will have to deliver to Companies House, at the same time as delivering their first confirmation statement after this requirement comes into force, a statement confirming that the identity of all existing directors has been verified.
If a company fails to notify Companies House within 14 days of a person becoming a director, the director will commit an offence if they continue to act.
Statutory registers
The requirement for companies to keep any statutory registers other than the register of members will be removed. This means that companies will no longer have to keep a register of directors, register of directors' residential addresses, register of secretaries or a register of people with significant control. The information that would have appeared in those registers will, instead, be kept centrally by Companies House.
However, the option for private companies to elect to keep information about their members on the central register maintained by Companies House will also be removed meaning that all companies will be required to keep their own register of members. Any company that currently takes advantage of the election will have to update its register of members to show all information that has been included on the central register i.e. it should be as if the election had never been made.
Companies will be required to obtain and keep more information about their members including their forename and surname and a service address (currently CA 2006 only requires the register of members to show the "name and address" of its members which means that sometimes only abbreviations of members' names appear). To assist with this members will be under a new duty to supply and update this information and companies will have a new power to request it.
Companies will need to provide Companies House with a one-off list of members when they file their next confirmation statement after a date which is to be specified.
Companies will not be permitted to register a share transfer unless they have the required membership information for the transferee.
Accounts and reports
Unless they are exempt from audit (and the directors have taken advantage of that exemption), companies qualifying as 'micro-entities' will be required to file annual accounts consisting of a balance sheet and profit and loss account. Filing a directors' report will be optional.
Companies qualifying as 'small companies' will have to file annual accounts consisting of a balance sheet and profit and loss account and will also have to file a director's report and any auditor's report. The option for small companies to prepare and file abridged accounts will be removed.
A company relying on an audit exemption will have to state in its balance sheet which exemption it is relying on and make a statement that it qualifies for the exemption.
RLEs to provide details of a 'relevant officer'
As only an individual can verify their identity, an RLE will have to provide details of a 'relevant officer' who is an individual and who has had their identity verified.
For companies, the relevant officer will have to be a director.
RLEs will need to ensure that at all times they have a verified relevant officer whose details are notified to Companies House and that this information is updated if there are changes to the relevant officer.
Ban on corporate directors
A ban on corporate directors has been the subject of discussion for some time. Although legislation passed in 2015 contains proposed changes to CA 2006 which will implement the ban, the key provisions have not yet been brought into force. However, at the start of March the government did bring into force a provision which will enable it to make regulations permitting certain exemptions from the ban. Although we still do not have an indication of when the ban will be implemented, this development suggests that the government is moving forward with it.
What we do know from the drafting of the provisions currently in CA 2006 is that companies will have a 12 month grace period to replace any corporate directors not covered by an exemption.
The government has also stated that it intends that only corporate entities with legal personalities will be able to act as corporate directors. In addition, all directors of corporate directors will need to be individuals whose identity has been verified.
Preparing for the changes
At present there is only a limited amount companies can do to prepare for the changes. It is important to stress that we do not have any indication of when the changes may come in. However, companies can:
- identify those individuals whose identity will need to be verified and check that they have the necessary documentation to be able to verify their identity when required;
- consider what changes need to be made to the company's accounting process;
- ensure they have up to date information on their directors, members and persons with significant control;
- review internal policies and procedures to identify any modifications required to comply with the new changes; and
- give some consideration as to who could be appointed as a director to replace any corporate directors if required.
If you require any further information, or specific advice, please contact our expert team.
