Your guide to the Economic Crime and Corporate Transparency Act

Back in the day, setting up a business was a lot easier. All you needed to do was register the business name, list a PO Box as your office, and submit filings with minimal scrutiny. However, these days, it’s a lot more technical than that. 

When the specific legislation was first introduced to Parliament as the Economic Crime and Transparency Bill, it created a massive shift in how UK corporate entities would be governed. The bill is now known as the Economic Crime and Corporate Transparency Act (ECCTA) and has meant that there is now a lot more protection available. 

Here, we’ll go through the Act and how it will impact your daily operations. We’ll also go through the concrete steps you need to take to ensure you remain compliant. 

What is the Companies House’s involvement in the Economic Crime and Corporate Transparency Act? 

In the past, Companies House would accept the opening of businesses in good faith, making it a lot easier to do business. However, this also meant that it left room for more ghost companies and business owners taking advantage of the system. 

Under the Economic Crime and Corporate Transparency Act, Companies House ensures that there are certain regulations in place to protect the economy from economic crime. The Registrar has four statutory objects that are focused on registrar integrity, cleaning up corporate data, and ensuring the prevention of unlawful activities. This means that Companies House evaluates and investigates your business information to make sure it is compliant. 

Companies House Enforcement

There are now certain procedures in place that directly impact how you need to file your business information, for example: 

• Query and challenge: Companies House needs to challenge information that appears suspicious, inconsistent, or misleading when it comes to existing records. 
• Reject and remove: They have the authority to reject non-compliant filings and can remove false, fraudulent, or inaccurate data without needing a court order. 
• Issue financial penalties: They can issue direct civil financial penalties, as well as pursue criminal prosecution or director disqualification when it comes to serious breaches. 

What is the Compliance Shift?

Operational Focus	The Old Model (Passive Register)	The New Model (Active Gatekeeper)
Role of Companies House	Administrative deposit for records	Active regulator and enforcement agency
Director Identity	Self-declared; zero identity verification	Mandatory identity verification (IDV)
Registered Address	PO Boxes and unmonitored virtual offices permitted	Mandatory "appropriate physical address"
Data Scrutiny	Filings accepted at face value	Filings queried, cross-checked, and scrubbed
Enforcement Action	Limited to minor administrative fines or court actions	Direct civil penalties, unlimited fines, and strike-offs

What Actionable Steps Can Business Leaders Take?

As a business leader, you’ll need to be able to both understand complex legislation and adapt your workflow accordingly to ensure compliance. Here are four practical compliance steps every executive team should implement in line with the Economic Crime and Corporate Transparency Act:

Verify All Director and PSC Identities

Make sure all of your directors and Persons with Significant Control (PSC) are subject to the mandatory Identity Verification (IDV). So, audit your current board and major shareholders, making sure that every individual has completed their identity verification. This needs to take place before filing annual confirmation statements or taking on new board appointments. 

Audit Corporate Addresses and Contact Info

Next, you’ll need to audit all corporate addresses and contact information. You can do this by confirming that your registered office has an appropriate physical address. You also need to be able to verify that your private registered email address with Companies House is actively monitored by your compliance team. 

Formalise Lawful Purpose Declarations

Every company incorporation and annual confirmation statement now requires an explicit declaration that the future activities of the company are intended to be lawful. As a business leader, try to incorporate this statement review in your annual governance routines. It is worth noting that making a false declaration on a confirmation statement is a criminal offence. 

Review Your Filing Agents (ACSPs) & Software Systems

You should also look at investing in software-based filing if you haven’t already, as Companies House is phasing out paper filings and is transitioning toward mandatory software-based filing. Any third-party agents filing on your behalf must be registered Authorised Corporate Service Providers (ACSPs).

Make sure that you check with your external accounting firms, corporate secretarial providers or law firms that they are registered ACSPs. 

What Happens If You Don’t Comply with the Economic Crime and Corporate Transparency Act? 

Failing to be compliant under the Economic Crime and Corporate Transparency Act will result in the following: 

• Unlimited fines: when it comes to serious economic crime failures, like breaching new corporate liability standards or failing to prevent fraud, organisations will face unlimited financial penalties. 
• Public annotations: Companies House can place public notices on your company profile which will state that the information supplied is unverified, under query or inaccurate. This will cause damage to your relationships with vendors and investors. 
• Director disqualification and criminal offences: if you deliberately submit misleading information or are operating with unverified directors, can trigger criminal charges or lead to director disqualification. 

The Economic Crime and Corporate Transparency Act has shifted the corporate culture in the UK. Corporate transparency is a must for business leaders and is an ongoing operational requirement. 

So, by auditing your internal registers, maintaining accurate corporate records and verifying leadership identities, you’ll be able to make sure that your business remains compliant while you grow and scale your business. 

If you’re looking for more information on business credit checks, get in touch with Creditserve today! We offer three packages - bronze, silver and gold - that you can choose from that allow you to run credit checks on any of the companies that you work with or will be working with in the future.