The Economic Crime and Corporate Transparency Bill

The Economic Crime and Corporate Transparency Bill

In March 2022 we reported on the Economic Crime (Transparency and Enforcement) Act (ECTEA) which was rushed through Parliament in two short weeks. The headline measure from that Act was the setting up of a register of overseas property ownership; something which we have reported extensively on in recent weeks.

At the time of the ECTEA, Companies House also signalled that it was working on further measures to strengthen corporate transparency. Some of these are now coming to fruition with the bringing of The Economic Crime and Corporate Transparency Bill to Parliament for its first reading on 22 September 2022.

Building on the ECTEA, the new Bill aims to deliver reforms to Companies House, to prevent the abuse of limited partnerships, and to give businesses more confidence to share information in order to tackle money laundering and economic crime. Powers will also be given to law enforcers to boost intelligence gathering and to seize and recover suspected criminal crypto-assets.

The headline measure in this Bill is the new identity verification requirement for all company directors, people with significant control and anyone else filing with the Registrar. Identity verification will either be directly with Companies House, or via an Authorised Corporate Service Provider such as Elemental.

Once the Bill becomes law all new corporations will have to undergo identity verification before the application for formation of a company is delivered to the Registrar. This will also apply to new directors of existing companies. Persons with significant control (PSC) will have a 14 day registration period whilst relevant Legal Entities will have 28 days. Once the Bill receives Royal Assent, there will be a transition period (still to be announced) in which existing companies will have to verify their Directors and PSCs.

The Government will also enforce the powers which it has in respect of Corporate Directors; giving companies with corporate directors twelve months to ensure that those corporate directors are corporate entities with “legal personality,” and that the directors of those entities have been subject to the appropriate identity verification process.

Failure to meet verification timescales will be met with a range of sanctions including criminal proceedings, civil penalties, incorporations being rejected, and being unable to file statutory filings. Unverified directors could also find themselves being prohibited from acting as a director in the future. There will also be sanctions in a range of other areas including failing to notify the Registrar within 14 days of a change of registered office or change to supervisory bodies; or failing to notify the Registrar of a registered email address.

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