Economic Crime and Corporate Transparency Bill: new director and shareholder (PSC) identification requirements

Insight

24.02.2023

The Economic Crime and Corporate Transparency Bill (the Bill) is entering its final review stages in Parliament and is expected to come into force this spring. In particular the Bill provides for several reforms to Companies House which will expand its role and give it greater powers to ensure the transparency of UK corporate entities. This is intended to guard against economic crime by improving the accuracy and integrity of the information available on the public register. Below are some of the key proposals. The most significant are the director and PSC verification requirements which represent a major shift by Companies House to require individual directors and significant shareholders to identify themselves.

Director identity verification: all company directors and those delivering documents to the registrar will need to verify their identity. This verification process must be completed (i) before applications to incorporate new companies or appoint new directors to existing companies are submitted to Companies House and (ii) by all existing company directors. Once fully in force, both the director and the company will commit an offence where an individual continues to act as a director having failed to verify their identity.
Persons with Significant Control: identity verification will also be required of all individual Persons with Significant Control (PSC). Any corporate PSC, ie one that is a Relevant Legal Entity, will have to verify the identity of their relevant officer. This applies to new and existing PSCs.
Rectifying inconsistencies: in addition to a new power enabling the registrar to query or reject new filings, the Bill will give the registrar increased powers to query, amend or remove information held by Companies House where it is out of date or inaccurate or where the company is legally required to amend it. The registrar will be able to reject documents provided by a company which are inconsistent with information already held at Companies House, and it will also be able to request additional information in order to make determinations about proposed filings.
Disclosure: the registrar will have enhanced disclosure powers to public authorities and other law enforcement and supervisory bodies which would otherwise contravene data protection legislation. At the same time, enhanced protections are to be put in place to protect the disclosure of members’ and directors’ personal data from the public register.
Enforcement: If an offence under the Companies Act 2006 is committed, the registrar will be able to impose a civil financial penalty on an individual, as an alternative to pursuing criminal prosecution through the courts.

As the Bill is being finalised, we don’t yet know exactly how the identity verification process will work, but it appears that verification will be a one-off process, to be conducted directly through Companies House or via an authorised corporate service provider and there will be transition period to allow existing companies to complete the verification process.

We will provide a more detailed update when the Bill has completed the legislative process. In the meantime, if you have any queries about the implications on your business, please get in touch.

If you require further information about anything covered in this article, please contact Charlie Court or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law as at the date of publication. It should not replace legal advice tailored to your specific circumstances.