The first set of reforms were introduced at the end of last year with the recasting of the corporate criminal liability identification doctrine into one focused on the actions or omissions of "senior managers" of corporate entities. Our earlier briefing, looking at the broader aspects of ECCTA (including those corporate criminal liability changes) can be seen here.
How are these reforms being introduced?
Two key sets of regulations made under ECCTA have brought these reforms into force. The first are the ECCTA Commencement No.2 Regulations 2024 (the "Commencement Regulations") which bring into force most (but not all - see important exceptions below) of the company law reforms introduced by ECCTA (over 70 sections in fact), as well as 15 sections in relation to the Register of Overseas Entities regime ("ROE") (set up by the Economic Crime (Transparency and Enforcement) Act 2022 ("ECTEA")). Some of these sections, as now in force, simply empower the Secretary of State to make regulations to introduce specific details of the relevant reforms. We mention below the most significant of the company law reforms now introduced.
The second set of regulations are the Limited Liability Partnerships (Application of Company Law) Regulations 2024 (the "LLP Application Regulations"), which amend the Limited Liability Partnerships Act 2000 (the "LLPA") and apply, as relevant, to LLPs the company law changes brought about by the Commencement No. 2 Regulations.
How are the Registrar's powers and responsibilities being expanded?
In two ways. First, the Registrar is now, for the first time, given specific statutory objectives to follow when performing her functions under the Companies Act 2006 (the "Act"). These include:
- to ensure that those required to deliver information to the Registrar, do so
- to ensure that all information held on the registers maintained by the Registrar is accurate and complete
- to ensure that information held by the Registrar does not create a false or misleading impression to the public
- to prevent companies and others carrying out (or facilitating others to carry out) unlawful activities.
Secondly, the Registrar's powers to query and investigate information filed with her have been expanded with the aim of promoting the integrity of registered information. This reform will operate in conjunction with the new requirements (when they are introduced) of requiring identity verification for certain corporate appointments such as directors and for persons filing information with the Registrar.
Thus the Registrar now has power:
- to reject filings that are inconsistent with information she already holds
- to require additional information to determine whether a statutory filing requirement has been satisfied or a filing contains the required information
- to require a company to resolve inconsistencies based on a wider range of information available to the Registrar than currently is the case
- to remove information from the register in greater circumstances than is currently the case (but information may not be removed that was required to be filed or where that would have "legal consequences" in relation to certain specified aspects of a company's registration including a reduction of capital, registration of a charge, dissolution or certain membership information, etc.).
In addition, lawful information sharing with, or by, the Registrar has been significantly widened so that: (i) any person may share information with the Registrar for the purposes of the exercise of her functions, and (ii) the Registrar may share information with any person for purposes connected with the exercise of her functions, and with any public authority for purposes connected with the exercise of that authority's functions.
Key new requirements for companies (and LLPs as applicable)
"Appropriate" registered office and email addresses
A company's registered office address must now satisfy a requirement of being an "appropriate" address - i.e., an address at which documents delivered: (i) would be expected to come to the attention of a person acting on behalf of the company, and (ii) could be provided with an acknowledgment of delivery. Failure to have such an address will be an offence and satisfaction of this requirement will have to be confirmed on any change of address (and a filing made confirming, as necessary, a change to an appropriate address when the annual confirmation statement is filed). Companies House has confirmed that this new requirement rules out any question of a company using a P.O.Box as its registered office address.
An updated Companies House form (AD01) requires any change of a registered office address to be confirmed to be an "appropriate" address. There is also a new form (RP07) which can be used to file a complaint with the Registrar that a company (or LLP) is misusing the complainant's address as its registered office, service or principal office address or that address is otherwise not an appropriate or effective address. Separate regulations have been made to allow the Registrar to change registered office and service addresses to a default address nominated by the Registrar for these purposes.
Companies must now also file an email address that the Registrar can use to contact them, which must satisfy the first condition of being an "acceptable" address (see above) but which will not appear on the Registrar's public record. Similar filings to those mentioned above for the registered office address will be required. A transitional period operates for filing details of a registered email address by existing companies - the filing must be made by the next date for the filing of their annual confirmation statement.
The LLP Application Regulations introduce the same new requirements for LLPs.
Lawful purposes and company and business names
Company and LLP formation registration will now require confirmation that the relevant entity is being formed for a lawful purpose and confirmation statements will have to confirm that the future activities of the entity are lawful.
Further restrictions have also been introduced on the use of certain company names, including names intended to facilitate fraud type offences, suggesting a connection with foreign governments, etc. (names suggesting connections with the UK government, etc., are already restricted), containing computer code, and names that the Registrar has previously directed must be changed.
An updated Companies House form (CS01) is now available for annual confirmation filings as from 5 March 2024 which includes confirmation of the lawful purposes of the filing entity.
Disqualified directors
Disqualification orders made against directors (or former directors) under the Company Directors Disqualification Act 1986 ("CDDA") require that the relevant person may not act as a director of a company. Now, as well as not being permitted to act as a director and committing a criminal offence if they seek to do so, the Act stops them being appointed as directors and any appointment will, as the case may be, cease or be void. The LLP Application Regulations make similar "disqualification" provision in respect of LLP members.
While not yet in force, the CDDA is also to be amended by ECCTA to include as an additional ground on which disqualification orders may be made, persistent breaches by a director of certain filing obligations and directors' and persons with significant control over companies' ("PSCs") identity verification requirements (when in force).
Personal information on Companies House registers
A series of detailed amendments have been made to the Act designed to prevent the misuse of personal information that might otherwise be recorded on Companies House registers. These expand the information that must not be made available for public inspection (by default) and include email addresses, certain residential addresses and other information provided to the Registrar. They also provide for regulations to be made by the Secretary of State requiring the Registrar, on application by a relevant person, to suppress from public disclosure information relating to an individual and also addresses on the register. These regulations have not yet been made.
The Government has outlined how this "suppression application" procedure will work in this ECCTA factsheet. Applications in relation to residential addresses, signatures, full dates of birth and business occupations will be straightforward but others, say relating to names, will require evidence as to the risk posed by disclosure. Though not available on the public register, this information will still have to be filed with the Registrar and the Registrar will be permitted - when the necessary regulations are made - to share this information with certain public agencies such as law enforcement and public authorities.
Other new requirements
The Commencement Regulations have also introduced several other, more technical, requirements from 4 March 2024, such as additional conditions that must now be satisfied for an administrative restoration by the Registrar of a dissolved company (or LLP) - the company or LLP will have to deliver top the Registrar all documents required to bring its filings up to date and pay any outstanding fines for late delivery of accounts.
Financial penalties and Companies House fees
Penalties
Draft regulations have been made that will allow the Registrar to impose financial penalties on a person if satisfied beyond reasonable doubt that the person has committed a "relevant offence" under the Act. This will help the Registrar in avoiding the expense, time and other resources required for legal proceedings to be taken when officers or companies fail to comply with their obligations under the Act. A "relevant offence" is any offence other than one in relation to the Act's requirements with respect to company secretaries, resolutions and meetings and audit. Penalties cannot be imposed where legal proceedings are being taken or a conviction has been obtained in respect of the relevant offence and proceedings cannot be taken where a penalty has been imposed. Penalties will be limited to the maximum fine that could have been imposed by the court and in any event to no more than £10,000. Appeals to a court against a penalty will be allowed on limited grounds and warning notices, prior to the imposition of a penalty, will have to be issued by the Registrar. These regulations will come into force on 2 May 2024 (if made on or before 1 May 2024) and the day after they are made if that is on or after 2 May 2024.
Fees
From 1 May 2024 various fees charged by Companies House for its services will be increased to take account of the additional workload that ECCTA imposes on the Registrar. For example, digital incorporation fees will increase from £10/12 to £50 (for companies and LLPs) and digital confirmation statement fees will increase from £13 to £34 (for companies and LLPs).
How these changes affect LLPs
As mentioned above, the LLP Application Regulations have introduced similar new requirements for the registration and filing responsibilities of LLPs. ECCTA allows for regulations to be make consequential provision to amend, repeal or revoke primary legislation (such as the LLPA). The LLPA provides for regulations to apply company law requirements to LLPs and the LLP Application Regulations amend both the LLPA (e.g., introducing the requirement for LLPs to have an "appropriate" registered office and email address) and the Limited Liability Partnership (Application of Companies Act 2006) Regulations 2009 (and so apply to LLPs the other new requirements mentioned above in relation to companies).
Further reforms to the Registered Overseas Entities regime
On 4th March 2024, the Commencement Regulations also made several further changes to the ROE regime created by ECTEA. The ROE regime, overseen by Companies House, applies to overseas entities holding, acquiring or disposing of real estate in the UK. This briefing does not go into the details of those changes but notably they include:
- expanding the content of the register of overseas entities
- additional circumstances when the failure to provide information to the Registrar will result in the relevant entity ceasing to be a ROE and so trigger restrictions on its ability to deal with UK real estate
- registration as a beneficial owner on the ROE where an interest, however, small, is held by an overseas entity as a nominee
- bringing trust arrangements involved in corporate structures holding real estate within the ROE regime.
Ban on corporate directors moves a little closer to taking effect
As indicated by the Government when ECCTA was passed, the Government is finally taking legislative steps towards implementing the Act's long outstanding prohibition (or rather restriction) on corporate directors. This is something that was legislated for in 2015 but has not yet been brought into force while the Government has been consulting on how the prohibition would work and, in particular, what exceptions should be available. Regulations took effect on 4 March 2024 to bring into force power for the Secretary of State to make regulations setting out those exceptions. As stated in our earlier briefing about ECCTA, the Government has indicated that those regulations will say that only corporate directors with legal personality will be permitted under the exceptions and all the directors of those permitted corporate directors will have to be natural persons whose identity has been verified. Companies with existing corporate directors will have 12 months in which to comply with these requirements.
What ECCTA reforms are still awaited?
Further significant reforms of UK corporate related laws under ECCTA, with no currently announced definite dates for implementation, include:
- reform of limited partnerships law
- introduction of the new identity verification regime for Companies House filings - Companies House have indicated that this will be introduced "later in 2024"
- abolition of the "local" company registers (i.e., the keeping of registers of directors, secretaries and PSCs by companies themselves and their replacement by registered information kept centrally by the Registrar)
- more informative shareholder information to be filed with the Registrar
- reforms to the annual accounts filing requirements for small or micro companies (requiring more accounting information to be filed).
Also, as mentioned above, certain ECCTA reforms covered by the sections of ECCTA brought into force on 4 March 2024, including those relating to:
- requirements for UK businesses to carry out certain due diligence in relation to customers or potential customers in order to identify any discrepancies between the information they get from the customer and information publicly available from the Registrar,
- information sharing by the Registrar with persons (in addition to those mentioned above under How are the Registrar's powers and responsibilities being expanded? )
still await implementing regulations before they will impact companies and others.
Final comment
The Commencement and LLP Application Regulations have introduced the first changes to the incorporation of, and filing obligations of, UK companies and LLPs. Further significant changes can be expected to come into force later this year, as well as (whether or not also this year) the major overhaul of UK limited partnership law. Watch out for our further ECCTA briefings on those changes.