After a lengthy period of scrutiny as it made its way through Parliament, the Economic Crime and Corporate Transparency Bill finally received Royal Assent on 26 October 2023, becoming the Economic Crime and Corporate Transparency Act 2023 (the “Act”).
The Act fundamentally changes the role of Companies House, the UK’s register of companies, and represents the most significant changes since the Register was established in 1844.
The intention is that Companies House will become much more of an active gatekeeper over company incorporations and a custodian of more reliable data than has been the case in the past.
The reliability of the information filed at Companies House and the relative laxness of any proper scrutiny as to the accuracy of the information stored by it has been subject to justified criticism for many years, especially recently when transparency and the fight against money laundering have risen to the top of the
political agenda.
The Act provides that the Registrar of Companies will have more effective investigative and enforcement powers to cross-check data with both public and private sector bodies and the power to share information with law enforcement bodies.
Of particular significance is that the Act requires all directors of UK companies, whether existing or newly appointed, to verify their identity. This requirement will also apply to anyone delivering documents to Companies House and to Persons with Significant Control or PSCs.
Identity verification will take place either directly via Companies House, which will use matching technology to compare a photograph or facial scan with a primary identity document such as a passport, or indirectly via an “Authorised Corporate Service Provider” which will be a professional who must be registered with a supervisory body for anti-money laundering purposes.
Notaries will be included in this category of professionals and should be ideally placed to provide reliable and trustworthy identity verification services. It is hoped this will increase the profile of notaries within the UK and highlight their usefulness in the fight against money laundering and corporate fraud.
Civil Law Notaries and other professionals may find it interesting to note that the reforms set out in the Bill do not alter the fact that, whilst the names of the directors of a UK company will continue to be publicly registered, hopefully with much greater accuracy and certainty, their powers of representation will still not appear on the registry.
This is of course unlike the case in many civil law jurisdictions where powers of representation, whether single or joint, can generally be ascertained from the Commercial Registry. In the case of UK companies, it is the board of directors as a body which represents the company; the board in turn can delegate powers to certain directors or other individuals to carry out particular matters.
These delegated powers are not required to be registered and Cheeswrights notaries are often called upon to issue certificates of representation in respect of the powers of UK directors to carry out specific transactions, particularly in relation to overseas real estate. Determining the powers of a UK director usually requires an examination of the company’s articles of association or statutes as well as its minute book and other internal regulations. This imposes a heavy burden of responsibility on notaries when issuing their certificates.
There will now be an implementation period for many of the Act’s provisions and there will also be a significant amount of detailed secondary legislation to be passed implementing many of the changes; substantial operational reform as well as increased expenditure will also be required by Companies House.
Some measures are expected to be introduced in early 2024, including a new rule requiring all companies to supply a registered email address, with the remaining provisions coming in over the next two years. The government should be issuing a timeline for the Act’s implementation shortly and we will be
updating clients and contacts accordingly.
City of London, November 2023