How will important changes to company law affect charitable companies and CICs?

Certain provisions of ECCT came into force on 4 March 2024, including:

1.    Improving quality of data on Companies House register
Certain provisions of ECCT aim to improve the quality of data on the Companies House register:

a)    Registered office addresses
All companies must, at all times, have an “appropriate address”, which is an address where:

• a document received on behalf of the company would be expected to come to the attention of a person acting on behalf of the company; and
• the document delivery can be recorded.

From 4 March 2024, companies will no longer be able to use a PO box as their registered office address.

If Companies House believes that an address is not appropriate, they will change it to a default address. The company will then have 28 days in which to change the address to an appropriate address and provide evidence of proprietorial ownership. If the company does not do this, Companies House may take action to start the process of striking the company from the register.

b)    Statement of lawful purpose
For company incorporations after the 4 March 2024, the members of the company will be required to confirm that the company is being incorporated for a lawful purpose. The company will then need to confirm each year on its Confirmation Statement that the company’s activities (and future activities) are lawful.

c)    Registrar’s powers
The registrar will have the power to query and, if necessary, remove information that appears to be inaccurate, incomplete, false or fraudulent more quickly, rather than needing to obtain a court order. There will also be additional checks to ensure that company names are not giving a false or misleading impression.

You can also expect to see annotations on the register from Companies House that note any issues with information that has been provided.

d)    Enforcement and sanctions
Companies House have a range of sanctions for companies that do not respond to a formal request from Companies House for further information within 14 days, which could include:

• financial penalties; 
• annotations on the company’s records; and
• prosecution.

2. Confirmation Statements
All companies will need to provide the following information with their Confirmation Statement:

• a registered email address for communications with Companies House (all companies incorporating after 4 March 2024 will also need to provide the email on incorporation); and
• confirmation that the future activities of the company will be lawful.

From 1 May 2024, there will be an increase to Companies House filing fees. Full details of the new fee structure can be found on the Companies House website.

1. Accounts

Over the next few years there will be a phased transition to filing company accounts online only. The timing of this transition depends on what type of accounts your company files. 

Additionally, there will be some changes to the accounts for small and micro-entity companies. Following the changes, small and micro entity companies will be required to file profit and loss accounts, and small companies that are not classified as micro entities will need to file a directors’ report. There will also no longer be the option to file “abridged” accounts.

Any company claiming an exemption from audit will need to provide an additional directors’ statement on the company’s balance sheet to specify which exemption applies and confirm that the company qualifies for this exemption.

2. Transparency of company ownership

Companies will be required to:

• record the full names of individual members and corporate members in the Companies House register; and

• provide a one-off full list of members.

There will also be additional information collected on persons with significant control (PSCs) and any company claiming an exemption from providing PSC details will be required to provide a reason for the exemption. 

There are new provisions to enhance and standardise member name information and powers to obtain that information, including the requirement for the register to include the “required information” in respect of each member, such as a member’s forename, surname and service address. The inclusion of this information will align the position of members with the position for directors and PSCs.

Companies House will also be putting into place restrictions on corporate directors, which will mean that only UK corporate entities with a “legal personality” will be able to be appointed as corporate directors. Additionally, any directors of the corporate director must be natural persons and will be required to verify their identity, in line with the new requirements. 

The date on which these measures come into effect is yet to be confirmed.

3. Identity Verification

New identification verification procedures are being put in place, so anyone setting up, running, owning or controlling a company in the UK will soon need to provide their ID. This will include all directors and PSCs. 

Those filing at Companies House on behalf of a company will also need to go through identity verification unless you are exempt.

Generally, providing ID will be a one-off requirement, but there may be some occasions where re-verification will be required, for example, if the registrar doubts the validity of the identity. 

For all new companies, directors must provide identity verification prior to incorporation at Companies House, while individual PSCs will have a 14 day period after the company’s registration in which to verify their identity, and for a relevant legal entity the period is 28 days. 

The implementation date for the new ID measures is yet to be confirmed, pending secondary legislation and guidance. 

4. Protecting information

Over the next two years, measures will be phased in to protect individuals’ information on the register. This will mean that once the measures have come into place, individuals will be able to apply to suppress the following information from historical documents: 

• Residential addresses shown on the register

• Day of birth on any documents registered before 10 October 2015

• Signatures

• Business occupation

Those at risk of physical harm or violence as a consequence of their information being public on Companies House will be able to apply to have the following information protected:

• Name (or previous names)
• Any address where public disclosure puts the residents at risk
• In the most serious cases, all other details including address for service and partial date of birth 

5. A new criminal offence: failing to prevent fraud

The provisions of the Act would mean that an organisation would be liable where a specified fraud offence is committed by an employer or agent for the organisation’s benefit and the organisation did not have ‘reasonable’ fraud prevention procedures in place. There is no requirement that the organisation’s senior management or trustees must have ordered it or have been aware of it. The offence is only relevant to large charities which meet two out of three criteria set out in ECCT:

• More than 250 employees

• More than £36 million turnover

• More than £18 million in total assets.

There is a defence that an organisation has ‘reasonable procedures’ in place to prevent fraud. This is similar to requirements under the Bribery Act. The government has confirmed it will issue guidance on reasonable procedures before the offence is brought into force. An organisation can receive an unlimited fine. Courts will take account of all the circumstances in deciding the appropriate level for a particular case.

Consequently, larger charities need to ensure their fraud prevention policies and procedures are fit for purpose, well-implemented on the ground, and communicated effectively to staff, volunteers and others acting on behalf of the charity to ensure that they are aware of their obligations.