New Laws to Fight Corporate Fraud and Corruption: Enhancing the Powers of the Register of Companies

January 2, 2024

New Laws to Fight Corporate Fraud and Corruption: Enhancing the Powers of the Register of Companies

---

By Emily Shingler

The Economic Crime and Corporate Transparency Act 2023 is the latest measure to reform corporate criminal liability and increase corporate transparency.

We previously explored the new ‘failure to prevent fraud’ offence created by the Act, which you can read here.

This article discusses some of the other changes that the Act is seeking to implement, specifically the ‘corporate transparency’ ambitions of the Act.

As well as taking steps to prevent fraud and expand the UK’s response to economic crime, the Act also seeks to support Companies House in delivering a better service and improving the reliability of its data.

Companies House performs two vital roles which underpin the UK’s business environment: it facilitates the creation of companies and other legal entities and it provides, free of charge and online, information about those entities on a public register. This is for the benefit of investors, creditors and the general public.

Companies House has already began preparing for the upcoming changes, with some measures expected to be introduced in early 2024. These measures include requiring all companies to supply a registered email address; stronger checks on company names; greater powers to query and reject information; and steps to identify and remove inaccurate information from the public register at Companies House.

Some of the other planned reforms include:

Record keeping

One of the key purposes of the Act is to empower the Registrar to promote the integrity of the public register and to proactively share information with other authorities. Currently, Companies House is required to accept information if it is “properly delivered”. It has limited powers to correct or query information in suspicious circumstances.

The legislative changes under the Act will permit the Registrar to correct or query information so that they can take proactive decisions about filing. If an entity fails to respond to a query, or to provide sufficient evidence in its response, the Registrar may take action. This is aimed at catching anything which undermines the quality of information on the register, or which enables individuals to pursue illicit activity, such as fraud and other economic crime.

There is also the suggestion that third parties will be able to raise a query or ‘tip off’ the Registrar when it comes to fraudulent activities.

Company registers

Companies will no longer be required to keep their own registers of directors, directors’ residential addresses, company secretaries and persons with significant control. Instead, they will be required to file all relevant information directly with Companies House.

ID Verification

For all new and existing companies, directors, persons of significant control and relevant officers of a registrable relevant legal entity, will be required to have their identification verified. The Act creates two types of identification verification; it can be done with Companies House directly or through an authorised corporate service (such as a law firm or accountancy firm).

A director will not be permitted to act as a director, and companies must ensure that a person does not act as a director, unless and until their identity has been verified.

The burden is on both the officer and the company to ensure verification; breach of these requirements will be criminal offences.

Next steps

Most of the provisions in the Act will be implemented via secondary legislation which is yet to be published and some of the changes will require development of new systems by Companies House before they are introduced. For that reason, it is anticipated that it will be at least a year until most of these provisions are in force.

There are, however, things that those responsible for company record-keeping and administration can be thinking about in the meantime. These include:

• identifying who will be subject to the new identity verification requirements within the business;
• looking at current practice for routine and transactional filings at Companies House and thinking ahead as to how these might continue or need to be adapted based on the new restrictions on who can file documents at Companies House on behalf of companies;
• ensuring that company records, including those relating to shareholders, PSCs and directors are complete and up-to-date.

If you require assistance with any commercial or corporate matters, please contact a member of our commercial team, Emily Shingler, via email at eshingler@darwingray.com or via telephone on 029 2082 9102 for a free initial chat to see how we can help you.