Part 3-Navigating corporate transparency: ECCTA reforms series

This is the third article in a series exploring the changes brought by the Economic Crime and Corporate Transparency Act 2023 (ECCTA). Our first two articles in the series, explaining other changes which have already been brought in by the legislation on 4 March 2024, can be found here: links to part 1 and part 2.

Data Sharing

Our previous articles explained that the purpose of the ECCTA is to detect and prevent economic crime by providing Companies House with greater gatekeeper powers. One of these powers allows Companies House to work alongside various other institutions to share and analyse data to determine whether there are signs which might indicate criminal activity.

Data sharing came into force on 4 March 2024 in the first wave of changes. Section 92 ECCTA inserted section 1062A which enabled the Registrar to analyse data they receive for the purposes of crime prevention and detection. Further, any person may disclose information to Companies House by virtue of section 94 ECCTA (inserting sections 1110E to 1110G into Companies Act 2006 (CA 2006)). Once Companies House are in receipt of this information, they can share this information (along with any results from analysing this data) to connected institutions such as HMRC, the Serious Fraud Office or police forces.

This power allows them to be proactive in assessing and disclosing any information to prevent and detect economic crime. The disclosure powers are wide as disclosures can be made without breaching confidentiality. These disclosures are still slightly limited as compliance is needed with the Data Protection Act 2018 and if information has been received from HMRC, their consent must be obtained before disclosing to any other organisations. This still leaves a wide range of information which can be disclosed and shared.

Using these powers of sharing and analysing said data, the Registrar can identify any red flags which indicate suspicious activity. From there, their new powers enable them to annotate the register to clean up what they suspect is incorrect data. You should therefore ensure that the data you share with various institutions is in line with one another to prevent an accidental red flag from affecting your company on the register. If data is shared which indicates that there is fraudulent activity, this can be shared with HMRC or the Insolvency Service. This new power is therefore very important as the consequences of Companies House analysing the data and determining there is a red flag could lead to changes on your Company’s register.

Restrictions on filing at Companies House

The ECCTA provides that unauthorised individuals cannot file documents at Companies House under sections 72 and 73. This has not yet come into force but drafts of the secondary legislation required to implement these changes were published in May. Filing individuals will now have their identity verified along with a statement confirming that they are in fact verified to file that specific document, unless they are exempt. There are very limited reasons to be exempt (only permitted when in interests of national security or for the purpose of preventing or detecting serious crime) so all directors and relevant individuals must be verified or face fines and even criminal charges.

Individuals who must be verified include:

• all individual directors of a company
• if the company has a corporate director, this must be a UK corporate body. All of its directors (which must be individuals) must be ID verified.
• persons with significant control (PSCs). If a PSC is a registrable relevant legal entity, then the natural person who is a relevant officer should be ID verified.

Disqualified directors will be unable to file documents on behalf of themselves or others. Further, now when a director is disqualified they automatically cease to hold office. Under the previous rules, a director could still act despite being disqualified although this would constitute a criminal offence. A person can still be liable for this offence if they continue to act as a de facto or shadow director and further offences, which we will discuss in a later article, are being put in place.

To assist with filing for those who are unable to do so themselves, an authorised corporate service provider (ACSP) may file on behalf of others. ACSPs are bodies such as accountants or legal advisers who are registered with the Registrar, and already have existing money laundering and due diligence obligations.   An individual can ask an ACSP for a verification statement or to file on their behalf as the Registrar considers enough due diligence will have been performed to verify the individual for crime avoidance purposes.

The remaining changes to be discussed are still to be brought in but there has been no indication as to when these will be expected. Our corporate team will continue to monitor the legislation for further progress. In the meantime, please contact our corporate lawyers here should you have any questions regarding the EECTA.