Get ready for the Economic Crime and Corporate Transparency Act
The Economic Crime and Corporate Transparency Act received Royal Assent on Thursday 26 October 2023. It is vital to understand the obligations for businesses, what changes are needed and how corporate structures could be simplified to reduce the compliance burden.
The Economic Crime and Corporate Transparency Act (the “Act”) is a key plank of Government plans to tackle economic crime and improve corporate transparency. The legislation will reform the role and the powers of the Registrar of Companies House and UK Companies House, with ministers convinced the new regime will make the UK a more attractive place to do business. Legal and CoSec teams will therefore need to get ahead of the changes.
Key changes
Covering UK companies and legal entities such as limited partnerships(LPs), the Act has been described as the most significant reform ever to the law in this area. Key changes include:
- New identity verification requirements for directors, partners of limited liability partnerships (LLPs) and LPs (including registered officers of the partner if the general partner is a legal entity). The requirements also cover people with significant control (PSCs) and those who deliver documents to Companies House.
- The introduction of the concept of an Authorised Corporate Services Provider (ACSP) who will be authorised to undertake the verification requirements and make filings at Companies House on behalf of companies and LPs.
- New statutory compliance obligations and stricter registration requirements for LPs, which have previously been subject to minimal compliance requirements.
These reforms will fundamentally change the ways in which companies, LPs and LLPs approach compliance and corporate governance. They also introduce a new offence for directors in relation to failures to prevent fraud.
To underpin the changes, the Registrar will be given broader powers, including more effective investigation and enforcement powers over directors and UK legal entities. The Act will give the Registrar authority to request additional information on proposed filings, and to query, amend or remove information where it is not satisfied about the accuracy of this information.
Whilst some measures in the Act will require secondary legislation and system development by Companies House before they are introduced, other measures are expected to come into force sooner (to start in early 2024). However, there will be a transitional period for existing companies and LPs to meet the identity verification requirements and to become compliant.
New verification requirements
The introduction of identity verification requirements for all new and existing registered directors, PSCs and anyone delivering documents to Companies House is a significant change. Identify verification can be undertaken via Companies House or through an ACSP. The latter, likely to be intermediaries such as accountants, legal advisors and company formation agents, will be able to deliver documents to Companies House and undertake the verification process. Alternatively, an individual seeking to file documents with the Registrar directly will need to first verify their identity. Individuals who fail to comply with the verification requirements could face criminal proceedings and civil penalties issued by the Registrar. Companies House may also decline to register documents.
New compliance requirements for UK LPs
For those who use UK LPs in corporate structures, the new Act will introduce a range of additional compliance requirements. The amount of information that must be notified to Companies House will increase substantially. These changes will impact all LPs, but those with a large number of individuals participating as partners will find the reforms particularly burdensome, given the need to provide Companies House with information about residential addresses and dates of birth.
By contrast, there are currently only limited compliance requirements for UK LPs within the UK, with fewer administrative burdens and ongoing filing obligations with Companies House than for a UK registered company. Significantly, much of the information that LPs will be required to file with the Registrar must be submitted by an ACSP rather than an individual.
Key changes include:
- ACSP
- Registered Officer
- Registered Office Address
- Annual Compliance Confirmation Statements
- Dissolutions
ACSP
Certain documents (including applications for registrations, a change of registered office address and changes to the details of officers of the general partner) will only be able to be delivered to Companies House by an ACSP.
Failure to comply with the new reforms will lead to penalties for the general partners of the LP and could lead to a criminal offence. In addition, the Registrar may deregister a LP that does not comply with the new requirements.
Registered Officer
UK LPs will be required to have a registered officer appointed at Companies House, which will be a member of the general partner. There will be requirements to keep data up-to-date relating to the registered officer.
Registered Office Address
All UK LPs will be required to have a registered office address and a principal place of business within the UK. The registered office address will need to be the principal place of business, the usual residential address of a general partner that is an individual, the registered office address of the general partner or an ACSP.
Annual Compliance Confirmation Statements
All UK LPs will be required to submit annual confirmation statements to Companies House.
Dissolutions
New legal procedures will be introduced to manage the dissolution or deregistration of UK LPs, with notification requirements to Companies House to this effect. The notification processes will need to be followed to ensure that partners retain their limited liability. UK LPs will be dissolved if they cease to have a general partner or a limited partner.
How PwC can help
PwC can work with clients to help understand the impact of the Act. We can also assist clients in reviewing corporate structures and provide support with restructuring and, where required, elimination of any surplus entities including LPs. PwC can also support clients with the wider changes outlined within the Act, including the changes to corporate liability for failure to prevent fraud.
Contact us
Partner, Entity, Governance and Compliance, PwC United Kingdom
Tel: +44 (0)7764 958130
