Economic Crime and Corporate Transparency Act 2023 – major business reforms on the horizon

Posted: 10/11/2023

The Economic Crime and Corporate Transparency Act 2023 (the Act) has now become law. The Act includes provisions that will, among other things, transform the role and operation of Companies House and amounts to some of the most significant changes to UK corporate transparency in 170 years.

The impact of the Act is far-reaching; all UK companies and other legal entities will be affected and non-compliance may even attract criminal liability.

Key corporate changes under the Act include:

• identity verification measures for all new and existing company directors, people with significant control, and those who file on behalf of companies. Equivalent measures will apply to LLPs. There will be two ways to undertake such verification: directly through a new Companies House portal or indirectly via an ‘Authorised Corporate Service Provider’;
• increased transparency requirements and changes to the registration process for limited partnerships;
• expanding Companies House powers aimed at bolstering the Registrar’s role to promote and maintain the integrity of the register through the use of new discretionary powers that broadly relate to querying, removing and changing company information, along with stronger checks on company names;
• increasing the ability of Companies House to share information with partners, such as law enforcement agencies and regulatory bodies in certain circumstances;
• enhanced protection of personal information aimed at making it easier for individuals to protect their safety by applying to suppress sensitive data; and
• simplifying the delivery of financial information and improving this information so it is more accurate and reliable for the purposes of making effective business decisions.

Companies House has already confirmed that while certain measures in the Act – such as identity verification – will not be introduced straight away, others are anticipated to come into force in early 2024. Click here for further details.

The Act also expands the economic crime regime by introducing a new ‘failure to prevent fraud’ offence aimed at large organisations. A corporate entity will be liable to unlimited fines where a specified fraud offence (to be detailed in secondary legislation) is committed by an employee or agent (such as contractors) for the corporate’s benefit and the organisation is found not to have taken reasonable steps to prevent fraud.

The government has committed to publishing guidance on reasonable fraud prevention measures before this new offence fully comes into force. In scope entities will have to review (and bolster, where needed) their internal policies and training to show that reasonable prevention procedures are in place.

The new legislation will also widen the scope of the corporate criminal liability regime by reframing the so-called ‘identification doctrine’ to make it easier to attribute criminal liability to a corporate entity (and relevant individuals) for offences committed by ‘senior managers’. The Act indicates that these new provisions will come into force on 26 December 2023. In the meantime, corporates should identify any ‘senior’ individuals who may now be in scope and consider training to ensure they are aware of any increased responsibilities. 

Companies House has published a range of factsheets, available here.

Next steps

While the Act has drawn much attention, we await secondary legislation to enact many of the measures and provide further details on how they will operate in practice, along with key operational changes at Companies House.

The reforms could have wide implications, potentially delaying transactions and board appointments or calling into question the validity of corporate actions. Equally, given the increased administrative burden that will be placed on corporate entities, businesses should begin to familiarise themselves with the new measures and revisit their governance frameworks.

We will monitor developments and provide further updates in due course.

If you have any concerns about the Act or would like to discuss its contents in more detail, please contact our specialist corporate team.

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