Owning a business brings about a wealth of challenges. Not least having to keep up to date with the everchanging legal requirements. This article addresses some of the key changes which business owners need to be aware about.
The Economic Crime and Corporate Transparency Act 2023 (the Act) received Royal Assent in October of 2023 and promises to strengthen the powers afforded to law enforcement agencies along with improving the transparency of companies registered in the UK, making it easier to prosecute corporate bodies for specific financial crimes and introduces a new offence to prevent fraud.
Whilst the Act is new in its inception, it does supplement the Economic Crime (Transparency and Enforcement) Act 2022 which many will remember as it was passed through Parliament at relative speed because of the Russian invasion of Ukraine in 2022.
One trend which has become apparent in recent times is the emergence of fraudulent and misleading fillings made to Companies House. Fraudsters would register companies at incorrect addresses with the purpose of applying for a line of credit connected with said ‘sham’ company. In 2022, over 10,000 applications were received whereby residential property addresses were used as a registered office without the consent of the legal owner. Fraudsters were able to register a company with the name of ‘Dinner By Heston Bumenthall’ with an extra ‘l’ and the Ritz Hotel were also subject to an attempt of identity theft recently when a company was incorporated with the name ‘Ritz Restaurant Limited’ on 19 December 2023. These high-profile cases underline some of the issues that the Act looks to block.
The Act enhances the role which Companies House plays with the aim of making UK corporate entities more transparent. Transparent can be interpreted different ways but it is assumed that one of the key driving factors behind the Act is to deliver a more reliable Companies House register.
The registrar of Companies House (the Registrar) has new powers to assist it in its objective to ‘promote and maintain the integrity of the register’ whilst also being able to ‘bear down on those who abuse corporate structures’. Only time will tell as to the frequency that the Registrar will exercise its powers, but it is certain that this is a step change from the current framework.
The Registrar also has at its disposal the ability to amend or remove information that it does not believe to be legitimate. More specifically, the Act also allows the Registrar to change the address of a company’s registered office and take action against those persistently failing to provide an appropriate registered office.
Another big change brought into force by the Act is the mandatory identity verification for directors and for persons of significant control (PSC). A director or PSC that fails to identify their identity will be committing an offence (both a criminal and/or civil penalty).
A company name cannot be too similar to another company’s name or trademark but the Act provides the Registrar with powers to prohibit the name of new and existing companies if it believes a name to be facilitating an offence involving dishonesty or deception. In the instance that a company name falls short of the new rules under the Act after a 28 day period, the Registrar will deem a company guilty of an offence and liable of a fine up to £1,000.
Companies must now have ‘an appropriate address’ and will not be able to use a PO Box as its registered office. The requirement is also requires companies to supply and maintain a registered email address.
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