ECCTA: Economic Crime and Corporate Transparency Act

The Companies House has widened its scope in combating financial crimes in the UK by introducing the Economic Crime and Corporate Transparency Act (ECCTA) in 2023. ECCTA was imposed in response to the circulating news of Russians hiding illicit funding in the UK. This act is the way forward in empowering Companies House’s role in ensuring transparency within UK companies and legal entities. 

What is ECCTA?

The Economic Crime and Corporate Transparency Act (ECCTA) represents a significant milestone in the UK’s efforts to combat financial crimes. It is a comprehensive legislative framework for financial security in the corporate sector. One of the primary focuses of this act is to address the issue of fictitious identities by enforcing rigid identification measures for directors and persons with significant control. Furthermore, introducing new reforms enforces ECCTA over larger organizations such as UK Limited Partnerships (UKLPs). The reforms cover the measures to prevent the misuse of cryptocurrencies.  

The ECCTA 2023 strengthens Companies House’s position in regulating the corporate sector in the United Kingdom. Companies House is a watchdog in the UK that records registered companies/partnerships and their information. In the future, Companies House is expected to implement a series of further reforms. 

Background 

Since the Economic Crime (Transparency and Enforcement) Act 2022 was enforced in response to the Russo-Ukrainian war, the UK government has been involved in creating strategies to combat financial crimes. The ECTEA 2022 is primarily concerned with the financial security of overseas entities owning property in the UK. The government took a year to counter the influence of dirty money on the UK’s economy and introduce the ECCTA (2023). This economic crime and transparency act encapsulates wide reforms to prevent and control financial risks. The ECCTA received royal assent on October 26, 2023, and was enforced in March 2024. 

Objectives of ECCTA 2023

According to the UK government, the primary three objectives of ECCTA 2023 are as follows: 

• Control bad actors’ involvement in the corporate sector, which abuses the UK’s economy. 
• Improve UK’s role in combating financial crimes 
• Empower the services delivered by Companies House

Regulations under the ECCTA 

Under the ECCTA, the series of regulations related to limited liability partnerships and Companies House’s additional powers have come into force. These regulations are discussed below:

• Registered Office Address Regulations 2024 

These regulations authorize Companies House to change the company’s registered physical address if it is deemed inappropriate.

• Service Address Regulations 2024 

Companies House may update the official service address of a relevant legal entity if it is found to be inauthentic.

• Principal Office Address Regulations 2024 

These regulations grant Companies House the authority to make corrections, with notification of principal office addresses.

• Registrar Regulations 2024 

Companies House now has increased authority to notify the register of misleading material or even remove it.

• Limited Liability Partnerships (Application of Company Law) Regulations 2024  

These regulations modify the LLP rules concerning the company’s name, registered office, directors, and individuals with significant control.

Changes Enforce as of March 2024

Companies House gains new power under ECCTA from 4 March 2024; these are discussed below:  

• Registrar’s Powers  

Companies House now has the power to query and reject any filings. It may remove material from the register and request further evidence. 

• False Statement Offences 

If the company provides invalid or misleading information, Companies House can apply criminal offenses exclusively without reasonable excuse. 

• Company’s Name

The criminal offense has been expanded as the company name rules are more strict, and additional categories of names are prohibited. 

• Mandating Electronic Filing

Company House has the authority to require all information to be filed electronically, enabling easy information sharing with other agencies.

Recent Changes from May 2024

On 2 May 2024, significant powers are transferred to Companies House as part of the Economic Crime and Corporate Transparency Act of 2023.

• Civil fines

The Financial Penalty Regulations of 2024, following the ECCTA, grant Companies House the authority to levy civil financial penalties of up to £10,000. This authority can be exercised when there is reasonable doubt that an offense has been committed. Companies House is expected to release guidance on how it will implement this new power under the regulations soon.

• Fees

The Registrar of Companies (Fees) (Amendment) Regulations 2024 adjust the fees payable to Companies House, effective 1 May 2024. These regulations amend the existing fees and introduce new fees. The existing fees have been increased. For example, the online same-day incorporation service has been raised from £30 to £78, and the fee for a same-day change of name has been increased from £30 to £80. Companies House has published an updated list of fees, effective from 1st May 2024.