22 February 2024

Changes to UK company law and what this means for UK companies

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The Economic Crime and Corporate Transparency Act 2023 (the Act) is set to reform aspects of UK company law, by making substantial changes to the Companies Act 2006.

The Act’s key aims are to prevent the abuse of UK corporate entities, improve transparency, and tackle economic crime. A significant area of reform being brought about by the Act will be that of the role and duties of Companies House, as it will play a more active role in achieving the aims of the Act.

What are the new duties of Companies House?

To enable Companies House to fulfil its new duties, generally, Companies House will be given greater powers to query information and take steps to clean up the register. Furthermore, changes will be made to the way in which it interacts with corporate entities, the information it collects from entities, and the ways in which entities will submit information to it.

Companies House is currently undergoing a transformation to prepare for these changes, the first of which is planned to be introduced on 4th March 2024. These changes will affect not only those planning to incorporate a new entity but already existing entities too.

How will changes to the Companies Act affect my company?

Existing corporate entities may need to take certain actions to ensure that their entity will be compliant with the new changes.

If you run or own a corporate entity in the UK, or you plan to do so soon, you should be aware of the key upcoming changes:

A company’s registered office address must be an ‘appropriate address’

A company must ensure that it has an ‘appropriate address’ as its registered office ‘at all times’.

An address will be ‘appropriate’ where:

  • A document addressed to the company, would be expected to come to the attention of a person acting on behalf of the company; and

  • The delivery of documents at the address is capable of being recorded by obtaining an acknowledgement of delivery.

This new rule means that companies are no longer able to use a PO box as a registered office, although you could still use a third-party agent’s address (such as your accountant) provided they meet the above conditions.

If a company fails without reasonable excuse to comply with this new rule, then the company and any officers of the company in default will be committing a criminal offence and could be liable to a fine. Furthermore, companies that appear not to have an appropriate registered office could be struck off the register.

You can change your registered office address using form AD01 either online with your company’s authentication code or by post.

The requirement for a registered e-mail address

All companies will be required to give a registered e-mail address to Companies House. This will not be made available on the public register, but it will be used by Companies House to communicate with companies.

New companies will be required to provide their registered e-mail address on incorporation, whilst existing companies will need to provide their registered e-mail address when they file their next confirmation statement. Companies House’ online services will prompt existing companies to supply a registered email address when filing their next eligible confirmation statement.

Similarly to a company’s registered office, the e-mail address must again be ‘appropriate’, meaning that e-mails sent to it by the registrar would be expected to come to the attention of a person acting on behalf of the company. The company is responsible for maintaining its appropriate e-mail address. Again, if a company fails to comply with this new rule, the company and its defaulting officers will be committing a criminal offence and may be liable to a fine.

Statement of lawful purpose

The subscribers of a company will now need to make a statement that their company has been or is being formed for a lawful purpose. For new companies, this statement will be made on incorporation, and an application to incorporate a new company will not be accepted unless this statement is made. A company will also need to confirm that its activities are lawful when making subsequent confirmation statements.

For existing companies, the statement of lawful purpose would be made when filing the company’s next confirmation statement. Companies House online services will prompt you to make the statement when filing your next eligible statement.

A new identity verification system

Company directors, persons with significant control (PSCs), and anyone else who files or will file with Companies House (such as members of a limited partnership or officers of a registerable relevant legal entity) will now have to verify their identity under new requirements.

It is planned that there will be two ways of undergoing identity verification, as follows:

  • Directly with Companies House, whereby the person undergoing verification will take a photograph of their face, and this will be compared against an identity document such as a driving licence or passport; and

  • Indirectly through an ‘Authorised Corporate Service Provider’, which are often accountants, legal advisers, and other agents.

The new identity verification requirements will apply to all new and existing entities. In relation to new companies, the directors must verify their identity before for formation of the company, and PSCs must also do so within a short time after the incorporation. If PSCs are not verified within a short time after the incorporation of a company, they will commit a criminal offence. Individual PSCs will have 14 days after registering with the registrar in which to verify their identity. For relevant legal entities, this period will be 28 days. Relevant legal entities will need to provide the name of their verified relevant officer.

For existing entities, it is planned that there will be a staggered transition period to allow directors, PSCs and others captured by the new requirements time to comply.

Final thoughts

Overall, the new Act will impose a number of new administrative requirements on both corporate entities that are to be formed, and on already existing entities.

To avoid potential consequences, it is advisable for existing entities to ensure that their registered office address meets the new requirements, to be mindful of the registered e-mail and statement of lawful purpose requirements when filing your next confirmation statement, and to keep up to date with further developments in relation to the new identity verification system.

If you need any help with these impending changes, please contact our corporate and commercial team for expert advice.

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Contact Holly to discuss this further.

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