Companies House reforms – a look ahead for businesses

Posted: 29/10/2024

The Economic Crime and Corporate Transparency Act 2023 (the Act) has marked its first anniversary since being introduced in October 2023. Touted as the biggest shakeup to UK corporate transparency and the function of Companies House, the Act was met with a flurry of initial activity, which has since settled.

This article considers the progress so far and - crucially - what else businesses can expect.

Where are we now?

Various changes were introduced in spring 2024, including greater powers for the Companies House Registrar to:

• query, reject and remove information that seems incorrect or inconsistent with information already on the register;
• undertake stronger checks on company names;
• annotate the public register to let users know about potential issues with the information that has been supplied;
• share data with partners, such as law enforcement agencies and regulatory bodies; and
• impose civil financial penalties (of up to £10,000) for most offences under the Companies Act 2006 (CA 2006), as an alternative to criminal prosecution.

There are also new administrative rules for businesses, including requirements for:

• corporate entities to supply an appropriate registered email address and to have an appropriate registered office address (with PO Boxes no longer permitted); and
• those forming a company, to confirm they are doing so for a lawful purpose when they incorporate. Every year, a company (or LLP) will need to confirm via its confirmation statement that their future activities will be lawful.

Separately, Companies House confirmed a range of fee increases, effective since 1 May 2024.

More recently, in October 2024, Companies House published guidance on its anticipated approach to exercising its enforcement powers (including fines, court proceedings and seeking director disqualification orders).

As regards financial penalties, broadly these will range from £250 to £2,000 per offence (depending on the severity and (in)frequency of any breaches). Notably, while Companies House has been empowered to issue fines of up to £10,000, there has been no suggestion that the Registrar will exercise this level of fine.

Rather, Companies House has stated that it will take a risk-based and proportionate approach towards enforcement – underlining this by providing contrasting examples of entities that are generally compliant but intermittently submit late filings (in which case, it envisages engaging with the entity to provide support and guidance, limiting penalties to fines), and those which are repeat and/or serious offenders (where Companies House intends to use its querying powers, seek court orders and prioritise prosecutions for false filings).  

Significant changes on the horizon

In October 2024, Companies House also published an outline transition plan, providing its clearest indication yet as to timings for implementing outstanding measures introduced under the Act. Some of the key phases are outlined below.

By autumn 2024 – Companies House will be able to issue financial penalties for relevant offences under the Act and the CA 2006.

By winter 2024 into 2025 – an expedited strike-off process will be possible where a company has been formed on a false basis. Companies House will also be able to annotate an entity’s public register in a range of circumstances – this may have additional implications for corporate transactions and financing arrangements.

By spring 2025 – individuals will be able to voluntarily verify their identity via a new Companies House portal. Additionally, intermediaries - such as accountants, legal advisers and company formation agents who are already supervised for UK anti-money laundering purposes - will be able to register as authorised corporate service providers (ACSPs) and undertake identity verification services.

By autumn 2025 - identity verification will become compulsory for new incorporations, newly appointed directors and new persons with significant control (PSCs). A 12-month transitional period will kick-in for existing directors and PSCs to verify their identity.

By spring 2026 – presenters filing any document at Companies House will need to have completed identity verification or be registered as an ACSP. Documents filed by disqualified directors will be rejected.

By the end of 2026 – this will mark the end of the transition period for identity verification of all individuals on the register. Additional filing requirements for limited partnerships will be introduced. Companies House will also undertake enhanced cross-checking of information with other public and private sector agencies.

Companies House is keen to stress that its intended timelines are dependent on substantial operational changes being in place and parliamentary timings for approving secondary legislation (where required).

What is not mentioned…

The following items are not addressed in the Companies House transition plan:

• timelines for implementing:
  • a move to centralised company registers to be held at Companies House (except for the register of members) and requirements for one-off shareholder statements;
  • restrictions on the use of corporate directors, including an outright ban on overseas corporate directors of UK companies; and
  • streamlined accounts filing processes;
• if the stated timelines for identity verification of directors and PSCs will simultaneously apply to LLP members; and  
• whether businesses should expect Companies House to increase its fees further before the end of 2026.

Commentary

While the full impact of the Act will take some years to materialise, it is clear that a number of significant changes are on the horizon which will impact all businesses in the UK. For a detailed guide on the reforms, including key considerations and how businesses can prepare for the changes, click here.  

Companies House has launched a new website outlining the reforms (click here). A range of factsheets has also been published (available here). If you have any concerns about the Act or would like to discuss its contents in more detail, please contact our specialist corporate team. We will be monitoring developments and providing further updates in due course.

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