Economic Crime and Corporate Transparency Act: First Reforms
Economic Crime and Corporate Transparency Act: First Reforms
As you may already be aware, a new piece of legislation called the Economic Crime and Corporate Transparency Act 2023 (ECCTA) brings in a number of changes aimed at tackling the abuse of corporate structures in the UK by increasing the transparency of corporate entities. We released a useful summary of the highlights of ECCTA in November 2023, which can be seen here Economic Crime and Corporate Transparency Act 2023: The Highlights.
The introduction of the Register of Overseas Entities (ROE) regime in August 2022 that requires overseas entities that own UK registered land to register on the ROE at Companies House was the start of the Government’s initiative to create better transparency in respect of corporate structures. As part of ECCTA, further changes to the ROE regime have been introduced to close certain loopholes and extend its scope.
Whilst confirmation on when most of the ECCTA changes will come into force is yet to be provided, the first set of changes were introduced on 4 March 2024. They are:
Registered office at appropriate address
Companies must now have an “appropriate” registered office address on record at Companies House.
A registered office address is considered to be “appropriate” if documents sent to it would be expected to come to the attention of a person acting on behalf of the company and the delivery of documents there is capable of being recorded by an acknowledgement of delivery.
P.O. boxes are therefore no longer permitted.
Should you need to amend the registered office address of a company, this can be done either by web filing or by filing the relevant paper form with Companies House.
Registered email address
Companies must now provide Companies House with an “appropriate” email address.
An email address is “appropriate” if emails sent to it by Companies House would be expected to come to the attention of a person acting on behalf of the company.
This email address will be used by Companies House to communicate with the company, but it will not be available to the public.
Existing companies will need to give a registered email address when they file their next confirmation statement, with a statement date from 5 March 2024 onwards.
Lawful purpose confirmation
Companies will need to confirm that the intended future activities of the company will be lawful.
This needs to be confirmed every year in the confirmation statement. Filing a confirmation statement without this statement will not be possible.
This will, again, apply to all confirmation statements with a statement date from 5 March 2024 onwards.
In addition to these changes, Companies House will have greater power to (i) query information and request supporting evidence; (ii) take steps to clean up the register by using data matching to identify and remove inaccurate information; and (iii) check company names’ compliance with the company name regime and change non-compliant company names. Going forward, we would therefore advise that all filings are carefully checked before submission to avoid the possibility of filings being rejected and that all historical filings are reviewed to ensure that they are accurate.
The changes that impact on the ROE regime that were also introduced on 4 March 2024 include:
Nominees and Trusts
The initial ROE rules were criticised for not dealing adequately with the fact that overseas entities may be held by nominees or by a trust, so ECCTA has closed these loopholes by expanding the meaning of “registrable beneficial owner”.
For any nominee arrangement, details of the ultimate beneficial owner must now be disclosed.
Irrespective of its own jurisdiction’s disclosure rules, a legal entity that is a beneficial owner of an overseas entity by virtue of being a trustee will be a registrable beneficial owner and need to provide details of the underlying trust.
If there is a trustee in a chain of ownership of an oversea entity, details of the trustee will also need to be disclosed.
Information about underlying trusts will only be available to HMRC and other specified authorities.
These changes apply with immediate effect for a new application of any overseas entity. For an oversea entity already registered, compliance is required with effect from 4 June 2024.
Duty to provide further information
Companies House has a new notice power where it can request information to evidence compliance with the overseas statutory obligations and to clarify any details on the register.
Failure to comply with any of these changes to the ROE regime could result in an invalid registration and lead to an inability to deal with the relevant registered property interests. In light of this, we would advise that any property portfolio that involves either nominee or trust arrangements be reviewed to ensure all correct details are registered on the ROE.
The above is intended to give you a brief summary of the changes that have been introduced as a result of ECCTA. If you would like further guidance on any of the points covered, please contact Sarah Merriott or your usual Wallace contact.
