Economic Crime and Corporate Transparency Act 2023 – Identity verification at Companies House

One of the most anticipated reforms of the Economic Crime and Corporate Transparency Act 2023 (ECCTA) is the introduction of stringent identity verification requirements at Companies House. These are aimed at improving corporate transparency by ensuring that those who are reported to Companies House as being the controlling owners and directors of companies are persons who have had their identities verified.

Who will need to have their identity verified?

Under ECCTA , unless they are exempt (for example, for national security reasons) identity verification will need to be carried out on:

• all new and existing directors of a company;
• all new and existing members of a Limited Liability Partnership;
• all new and existing general partners of limited partnerships;
• all new and existing persons with significant control of a company (PSC) and registerable relevant officers of relevant registerable legal entities (RLEs); and
• any company or individual who will be delivering documentation to Companies House on behalf of a third party, such as an Authorised Corporate Service Provider (ACSP).

The specific details of how the identity verification process will work in practice and the date of implementation of these changes are not yet clear. In order to implement the identity verification requirements substantial investment into Companies House by the government is required so it can put in place the necessary IT systems and processes and in addition, detailed secondary legislation is also needed.

What we know so far

What we know so far is that:

• Identity verification will either be completed directly via Companies House or indirectly through an ACSP.
• Identity verification will almost certainly be a digital process.
• If an individual verifies their identity through Companies House, it is anticipated that they will be required to link their identity with an ID document (such as a passport or driving licence) and technology implemented by Companies House will scan the document and confirm the individuals’ identity. The verification process is expected to take a matter of minutes.
• The identity verification checks undertaken by ACSPs will be very similar to those carried out directly with Companies House.
• ACSPs will be required to declare that they have completed all necessary identity verification checks when interacting with Companies House and they will be required to retain all records confirming that identity verification checks have been undertaken, as Companies House will have the authority to request that information as and when necessary in an attempt to combat fraudulent activity.
• It is expected that identity verification will only be required to be done once per person unless Companies House specifically requires otherwise in a particular case.

What is the timeframe for the verifying ID?

There will be a transition period to allow existing directors and PSCs/RLEs to comply with the new requirements. For example, it is expected that all directors will be required to file evidence of their identity being verified at the same time as filing the company’s first confirmation statement after the relevant provisions of ECCTA are brought into force.

When the changes are implemented:

• all new directors will need to verify their identity within 14 days of being appointed and before their appointment is notified to Companies House within this timescale;
• new PSCs will be required to verify their identity within 14 days of updating Companies House that they have become a PSC; and
• new RLEs’ relevant officers will be required to verify their identity within 28 days of informing Companies House that they are an RLE.

What are the penalties for not complying with the new verification regulations?

Directors are not permitted to act as directors unless their identity has been verified and it is an offence for a person to act as a director (or for a company to allow a person to act as a director) without first verifying their identity. ECCTA also provides that directors can be disqualified from being a director if they have had three or more breaches of company legislation, including non-compliance with filing obligations at Companies House.

ECCTA will place a duty on a company to notify Companies House within 14 days if a person becomes or ceases to become a director and the notification must confirm that the director’s identity has been verified. It will be an offence to continue to act as a director outside the 14 day period if Companies House has not been informed of the appointment.

Failure to comply with the identity verification requirements can result in various penalties including the following:

• criminal proceedings, resulting in an unlimited fine
• any relevant filings submitted to Companies House may be rejected
• Companies House may apply restrictions on the ability to file documents at Companies House
• the public register may be updated to reflect that an individual’s identity is unverified
• directors whose identity is not verified may be prohibited from acting as a director in the future.

If you have any questions in respect of the proposed changes outlined above or would like assistance to get ready for any of the changes brought in or being brought in by ECCTA  you can speak to a member of our expert Corporate team. Please contact us on 0161 832 3434.