The ECCTA (Economic Crime and Corporate Transparency Act) has launched multiple Companies House reforms and changes to the current rules for directors, companies, and partnerships from 2024. These reforms are expected to tackle and investigate financial crimes and support economic growth.
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New and existing registered company directors and anyone who files on behalf of the company will have new responsibilities in the coming days. The administrative implications of the Companies House reforms will mostly affect small businesses. Therefore, every business must understand the reforms to stay compliant with regulations.
Table of contents
- What are the new Companies House reforms?
- What are the implications of the reforms?
- What are the regulatory requirements?
- What will the impact of the reforms be on those affected?
- Final thoughts!
What are the 9 new Companies House reforms?
According to the fact sheet published on the UK Government website, the new Companies House reforms being brought in by the ECCTA bill aim to handle financial crimes and improve transparency over corporate entities.
Some of the major changes in the Companies House reforms include
1. Identity verification measures
Any individual setting up a business in the UK, running, owning, or controlling a company must follow the identity verification measures.
2. Confirmation statement changes
A company’s confirmation statement confirms that the information at Companies House is updated. Every UK company, including dormant and non-trading ones, must file its confirmation statement at least once a year. Even if no change of event occurs throughout a period, submitting confirmation statements every year is necessary.
According to the new law, this confirmation statement requires additional information. It will confirm every year that all UK companies’ intended future activities will be legal.
3. Registered office address
According to the new law, companies must register at an appropriate address and not use PO Boxes as registered office addresses. Companies House can change your registered office if it doesn’t satisfy their requirements.
If you fail to maintain an appropriate registered office address, the company and all your directors will be liable.
4. Registered email address
Every company must provide a registered email address to Companies House for communication purposes. This email address will not be publicly available. All existing companies must submit their registered email address on their next confirmation statement from March 2024.
5. Company ownership transparency
Companies must notify the Companies House of their additional shareholders’ information. However, according to the reforms, there will be a restriction on the use of corporate directors.
6. Filing accounts
According to the new reform, all companies, including small companies, must use software for filing accounts. The other two options, web and paper filing, will no longer be available in 2-3 years; therefore, you must start looking for suitable software.
7. Changes to small and micro-entity company filing options
Small and micro-entity businesses must file their profit and loss accounts with the Companies House. The format of the profit and loss is not published yet.
8. Changes to limited partnerships
Limited partnerships must submit more information to Companies House in the future through authorised agents, also known as Authorised Corporate Service Providers, who are registered with the Companies House.
The Companies House will have new powers, including
- Close down or restore limited partnerships
- Apply sanction
- Protect information of the partners
- Operate statutory compliance process
When the new regulations come into action, limited partnerships must provide the following information
- Partner’s name, date of birth, and usual residential address
- Verify the general partners’ identity
- Provide a registered office address within the UK
- Produce a standard industrial classification (SIC) code
- File confirmation statement annually
9. Register of overseas entities
Overseas companies who purchase, sell, or transfer property in the UK must register with Companies House. They must also notify the Companies House about their registrable beneficial owners and managing officers.
What are the implications of the reforms?
Previously, all the changes made to the Companies House filing requirements were aimed at making the system more transparent, specifically identifying the real ownership of a company.
However, the introduction of submitting confirmation statements and removing annual return submissions have made the process less transparent. This is because the documents available to the government now contain little to no information to identify any changes in a company during a particular period.
This means that to identify all the shareholders of a company, in certain cases, you need to go through multiple filings to ultimately find one that contains the shareholders list. Therefore, the system doesn’t look as transparent as it was thought while planning for the changes.
What are the regulatory requirements?
The reforms will potentially improve transparency as information is now publicly available. However, it will increase the burden on small companies to comply with regulatory requirements and associated costs.
All businesses running in the UK must understand the proposed Companies House reforms. They must make necessary preparations to ensure they comply with the new regulations and prevent themselves from costly penalties.
What will the impact of the reforms be on those affected?
The impact of the reforms will partly depend on the size and structure of the company. However, the potential implications for most businesses will be
- Increased costs to maintain compliance, particularly for businesses having multiple directors and PSCs (People with Significant Control)
- Reduced flexibility in how companies used to file their annual accounts
- More transparency but reduced privacy as most financial information about limited companies will be available to public registers
- Greater risk of investigation by Companies House
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Final thoughts!
Even though there is no set time available when the Companies House reforms may be introduced, small businesses must get ready to comply with the changing laws. You can consult with an experienced accountant about your obligations, and they will guide you through the process.