The Economic Crime and Corporate Transparency Act 2023 – The impact and changes on Companies House

Introduction

In the realm of corporate governance, understanding the implications of laws and regulations is crucial. This blog delves into the significant changes brought about by the Economic Crime and Corporate Transparency Act 2023.

Main Body

Companies House is the United Kingdom’s registrar of companies. It is responsible for incorporating and dissolving limited companies, as well as maintaining the public register of companies. This institution plays a pivotal role in ensuring transparency and accountability within the corporate sector.

The Economic Crime and Corporate Transparency Act 2023, set to come into force from March 4, 2024, aims to enhance the powers of Companies House. The Act focuses on improving the accuracy of information in the register and preventing unlawful activities. Key objectives include ensuring compliance with document submission, maintaining accurate records, and preventing the creation of misleading impressions.

Under the new Act, Companies House will have enhanced powers to query information and request supporting evidence. If false, misleading, or incorrect information is identified, Companies House can remove it. Additionally, the Act strengthens the Registrar’s ability to share information with law enforcement agencies and other government departments. This includes addressing offences related to fraud, such as false representation, failure to disclose information, and abuse of position.

Examples

One common issue is the submission of incorrect financial statements. This can involve overstating assets or understating liabilities, which paints a misleading picture of the company’s financial health. Similarly, false director information is another area of concern. This might include listing individuals as directors who are not actually involved with the company or failing to update the register when directors change.

Misleading shareholder information is also problematic. This could involve providing incorrect details about the ownership of shares, such as inflating the number of shareholders or misrepresenting their identities. Additionally, using an address as the registered office that is not actually used by the company, or failing to update the address when it changes, can lead to significant issues.

Finally, failing to accurately disclose the individuals who ultimately own or control the company, as required under the People with Significant Control (PSC) regulations, is another example of providing false information.

Penalties and Sanctions

Companies that have provided false, misleading, or incorrect information may face financial penalties or criminal sanctions. The Registrar has the discretion to choose between pursuing a financial penalty or referring the matter to law enforcement for criminal prosecution.

The scope of offences includes various sections of the Companies Act 2006, excluding parts related to company secretaries, resolutions and meetings, and audits. The new regime aims to link civil sanctions with director disqualification, ensuring that financial penalties can be grounds for disqualification. Additionally, under the Economic Crime and Corporate Transparency Act 2023, Companies House can reinstate a dissolved company if it has provided false or incorrect information that another party has relied on. 

To ensure compliance with the Economic Crime and Corporate Transparency Act, companies should implement robust procedures to prevent fraud and ensure the accuracy of information submitted to Companies House. This includes regular audits, employee training, and establishing clear protocols for document submission and verification. Companies should also be prepared to provide evidence of these procedures if queried by the Registrar.

Summary

At Buxton Coates, we specialise in ensuring that your company is incorporated correctly and that you remain compliant with all relevant regulations. Our team of experts can provide comprehensive advice on corporate issues whether it be assistance with incorporation, compliance with the Economic Crime and Corporate Transparency Act, or general corporate governance, we are here to help.

Contact us today to ensure your business is on the right track on 0330 088 2275.