The Economic Crime and Corporate Transparency Act 2023 (Act) received Royal Assent on 26 October 2023. Its aim is to combat economic crime and improve transparency over UK companies. Companies House will now take a more active role with wider powers to verify and query information on its register.
The Act has come into force in stages over a period of time. Some of the changes under the Act that are already in force are:
- all companies must have an “appropriate address” which is a physical address within the same country that the company is registered in;
- each annual confirmation statement and incorporation applications dated after 4 March 2024 will require the inclusion of an appropriate email address for the company which will become the registered email address and confirmation that the company’s activities (and future activities) are lawful;
- the Act abolishes the requirements imposed on a company to keep its own register of directors, secretaries and persons with significant control (PSCs). Instead, new provisions have been inserted into the Companies Act 2006 relating to the information of directors, secretaries and PSCs that must be notified to the registrar; and
- Companies House has greater powers to query and challenge information on the register that appears to be incorrect or inconsistent. The registrar also is able to remove information faster if the information is inaccurate, incomplete, false or fraudulent.
Identity Verification
Of all the changes under the Act, the biggest change is the introduction of identity verification. On 22 May 2024, Companies House published a draft version of the registrar’s rules on Companies House identity verification. In summary, the rules set out that anyone setting up, running, owning or controlling a company in the UK will need to verify their identity to prove they are who they claim to be.
The information required for each individual will be:
- Full name and any former names;
- date of birth;
- email address;
- residential address; and
- supporting identification.
Who do the identification verification rules apply to?
The rules apply to:
- directors and owners of companies incorporated in the UK;
- directors and owners of overseas companies registered with Companies House
- existing companies and newly incorporated companies;
- members/partners of LLPs and limited partnerships;
- anyone else making filings at Companies House; and
- for corporate shareholders who are registered as Relevant Legal Entities (RLEs), the requirement will be to appoint a registered officer, who will need to verify their identity and confirm they are the appointed registered officer.
New directors and individual PSCs will have 14 days to verify their identify, an RLE will have 28 days.
The Verification Process
Identity will be verified directly through Companies House or indirectly by an Authorised Corporate Service Provider (ACSP):
Direct Identity Verification
The process will likely involve creating an account and linking an individual with a primary photo identity document, such as a passport or driving licence. The system will take a photo of the individual’s face and compare the two and may check against government databases. It is expected this process will only take a few minutes, and once a director has a verified account, they will obtain credentials which will need to be provided for all existing and new director appointments.
Indirect Identity Verification
ACSPs must be registered with a supervisory body for anti-money laundering purposes and already have an existing obligation to carry out customer due diligence checks on their clients. Any individual or entity who wishes to become an ACSP must register with Companies House.
ACSPs will be able to make verification statements which have the effect of changing an individual’s status from unverified to verified. Verification statements can only be delivered by ACSPs. The verification statement will include:
- the date the ACSP confirmed the verified person’s information was true;
- the ASCP’s unique reference code;
- personal information of the verified individual including full name and former names, date of birth, contact information; and
- details of the evidence the ACSP used to verify the identity of the person.
ACSPs already have a duty to carry out due diligence checks on all their clients. The Companies House identity verification process will build on these existing checks.
Consequences for a failing to verify identity
Failure to comply with the identity verification requirements of the Act will be an offence. On incorporation, the registration of a new company may be rejected if its directors are unverified. Unverified directors will also be committing an offence and will be liable for penalty, they may also be prevented from acting as a director, and a company directed by such unverified directors will also be committing an offence. In serious cases, criminal proceedings may be commenced with the potential of an unlimited fine.
Timeline
Companies House will be introducing a process for third parties to become ACSPs. The introduction of the identity verification will likely start by March 2025. This will begin a transition process for a phased roll out from Spring 2025 and beyond.
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