Anticipated Revisions to UK Company Law Effective March 4th, 2024
The landscape of UK company law is set to undergo significant transformation with the introduction of the Economic Crime and Corporate Transparency Act 2023. This legislation, which received Royal Assent on 26th October 2023, is poised to implement a series of pivotal changes aimed at enhancing transparency, fostering economic growth, and combating economic crime. As we approach the enforcement date of 4th March 2024, it is crucial for businesses to acquaint themselves with the forthcoming alterations to company law and prepare for their implementation.
The Rationale Behind UK Company Law Revisions
The Economic Crime and Corporate Transparency Act 2023 has been crafted with the objective of improving the integrity and accuracy of data maintained by Companies House. This initiative is expected to bolster the UK’s economic landscape by:
- Mandating identity verification for company directors, persons with significant control (PSCs), and company representatives.
- Expanding the regulatory authority of Companies House to ensure more diligent oversight of company formations and data accuracy.
- Advancing the quality of financial information on the register through digital technology, thereby facilitating informed business decisions.
- Strengthening Companies House’s enforcement capabilities and enhancing their capacity to share pertinent information with strategic partners.
- Increasing the protection of personal information to safeguard individuals from fraud and other malicious activities.
Adjustments to Registered Office Addresses
From 4th March 2024, all UK-registered companies, including limited companies, LLPs, LPs, and SLPs, must designate an ‘appropriate address’ as their registered office. This address must be one where documents can be expected to reach a company representative and where delivery can be acknowledged. Notably, PO Boxes will no longer suffice as registered office addresses. Non-compliance will prompt regulatory action by Companies House, potentially leading to a default address assignment or even company dissolution if a suitable address is not provided within 28 days.
Introduction of Lawful Purpose Statements
The new legislation requires that any new company registration from 4th March 2024 include a statement affirming its formation for a lawful purpose. Additionally, an annual Confirmation Statement must be filed to reassert the company’s commitment to lawful operations. This measure places greater responsibility on company officials to ensure lawful conduct.
Email Address Requirements for Confirmation Statements
Companies must now provide an ‘appropriate’ registered email address to Companies House, which will be used for official communications but not displayed on the public register. This email address should be one that is regularly monitored by someone acting on the company’s behalf.
Elimination of Company Registers
The requirement for companies to maintain their own registers, including those of directors, secretaries, and PSCs, will be abolished. Companies must continue to ensure that the information held by Companies House is accurate and up-to-date. The implementation date for this change is pending further legislation.
Transition to Software-Only Filing of Annual Accounts
Companies House is phasing out traditional filing methods for annual accounts, including WebFiling and paper submissions, in favour of software-only filing. This move aims to streamline the filing process and enhance data quality on the register. Companies are encouraged to adopt approved software in preparation for this transition.
Modifications to Small Company Filing Procedures
Over the next few years, small companies and micro-entities will see changes to their filing processes, including:
- The removal of abridged accounts and paper filing options.
- The requirement to file profit and loss accounts and directors’ reports with annual accounts.
- The empowerment of Companies House to demand comprehensive digital filings.
- Restrictions on the frequency of shortening the Annual Reporting Period.
Changes to Audit Exemption Statements
Directors of small companies, micro-entities, dormant companies, and certain parent companies and subsidiaries will soon need to provide an additional statement on their balance sheet to identify the audit exemption claimed and confirm eligibility. The exact date for this change is yet to be announced.
Identity Verification Enhancements
A new identity verification process will be introduced for individuals involved in setting up, running, owning, or controlling UK companies. This will apply to directors, PSCs, LLP members, and company representatives. Existing company officials will have a transition period to complete verification, and the process can be conducted directly with Companies House or through an authorised agent.
Concealment of Personal Information on Historical Filings
Individuals will be able to request the suppression of personal details such as home addresses and signatures from historical filings on the public register without needing to provide evidence. Additional measures will enable those at risk of harm to request the concealment of their names and sensitive addresses, with the possibility of hiding all personal details in severe cases.
Revisions to Limited Partnerships
The 2023 act aims to enhance the transparency of LPs by requiring:
- Disclosure of partners’ personal details and identity verification for general partners.
- A UK-registered office address.
- Provision of a SIC code.
- Submission of an annual confirmation statement.
- Filing of information through an authorised agent.
These changes will be gradually introduced following the passage of the necessary legislation.
Enhanced Transparency of Company Ownership
Companies will be required to record and provide comprehensive shareholder information. Companies House will also collect and display additional information from companies exempt from providing PSC details, including the reasons for exemption and conditions for recording a relevant legal entity (RLE) as a PSC. Only UK corporate entities with legal personality will be permitted to appoint corporate directors, whose directors must be natural persons and undergo identity verification.
We trust that this comprehensive guide has elucidated the imminent changes to UK company law. It is imperative for businesses to review these modifications and understand their implications. While some changes are already in effect, others will be gradually introduced. These reforms are expected to yield long-term benefits, including a reduction in economic crime and fraud, and contribute to the overall growth of the UK economy.
For further details on these upcoming changes, please read our article: “Ten Upcoming Changes to UK Company Law From 4th March 2024”.
