On 4 March 2024, the first phase of the ECCTA reforms to the UK Companies House went live. These changes to the UK company law, made by the Economic Crime and Corporate Transparency Act 2023, expand the powers and objectives of Companies House and make it a more active gatekeeper of company creation and information.
The goal is to improve the quality and accuracy of data available on the website. At the same time, several other changes made by ECCTA to the Companies Act 2006 came into force. This article explores the recent changes to UK company law that were brought about this year.
Overview of the UK Company law changes
While the key changes in the company law may fill you with dread, please note they’ve been introduced to better tackle economic crime and improve corporate transparency.
1. New objectives and powers of Companies House
The UK Companies House now exercises the power to:
- Reject any new filing on grounds of inconsistency with information held by Companies House, thus creating reasonable doubt about whether the latest filing is accurate
- Require extra information to satisfy queries about information delivered to, or in the possession of, Companies House
- Remove non-compliant material from its registers
- Require any inconsistencies to be resolved
- Share information with law enforcement agencies and other public authorities as necessary
It also must analyse information in its possession to detect or prevent crime.
2. Company names
The Companies House has now introduced tighter regulations around company names. For instance, a UK company cannot be registered with a name that:
- Includes computer code
- Intends to facilitate any offences that involve dishonesty or deception
- Could give the false impression that the company is linked with a foreign government or international organisation
3. Appropriate registered office address
ECCTA requires every UK company to have a registered office address where documents can be expected to reach someone acting for the company.
If the registered address is inappropriate, Companies House can ask the company to change it. For instance, companies may no longer use PO Boxes as registered office addresses.
4. Requirement for email address
All UK companies are required to provide a registered email address to Companies House. This will be used for any Companies House communication, so they should provide an email address that can be actively monitored.
New companies must include the email address in their incorporation process, while existing ones must include it in their next confirmation statement.
5. Lawful purpose statements
Every UK company will need to confirm — as part of its annual confirmation statement process — that its intended future activities are lawful. New companies need to make a similar confirmation during the incorporation process.
6. Directors and disqualification
Under the new restrictions, a director disqualified under the Company Directors Disqualification Act 1986 (CDDA) will automatically cease to hold office. Any appointment of that individual as director of a UK company is now void. New rules also allow disqualification of those designated under UK sanctions legislation.
7. Limited liability partnerships
All the new requirements related to company names, office addresses, email addresses, lawful purpose statements, and disqualification will also apply (with appropriate modifications) to limited liability partnerships and their members.
8. Increased fees
From 1 May 2024, Companies House will be increasing its fees to reflect the costs of funding these new objectives and powers.
Company law changes for small businesses: Challenges to know
The new changes are either already in force or will soon come into force, so small businesses and their accountants must understand and get used to the rules quickly. This, however, comes with its own set of challenges.
- Not all small businesses have the processes in place to meet the new administrative requirements.
- A renewed emphasis on digital filing could create problems for those still transitioning to digital.
- With the unabridged filing, small companies could be concerned that competitors and credit rating firms will now be able to access their full financial statements.
- The extra filing requirements can burden small companies and even push them to disincorporate.
How accountants can help small businesses adjust to the changes to the UK company law
As UK companies get used to the new measures, accountants play a pivotal role in supporting their clients:
- They can interpret the reforms and explain to clients how they will impact their business.
- They can review their clients’ financial information and help them plan for better decision-making, such as whether their financial reports need extra work before the client applies for funding.
- They can review the company details and point out any potential problem areas with the registered name, address, or email address.
- They can determine what changes need to be made to the annual accounts.
Final words
As we’ve discussed, the changes to UK company law require careful consideration and adaptation from businesses across the country. Given the stricter restrictions, it’s vital that UK companies be suitably prepared for the new reforms.
Now more than ever, accountants and businesses must work closely together to navigate the reforms and their implications. If you’d like clarity on the changes to UK company law, it’s best to consult us.
We have the necessary know-how to explain the implications of the ECCTA reforms and whether you should worry about them. If you plan to start a business and register it on the Companies House website, then there’s never a better time to contact us.
Establish your company in compliance with the changes to the UK company law. Book a free consultation with Lyel Accountants today!
