Economic Crime and Corporate Transparency Act 2023 – Will corporate directors finally be a thing of the past?

Corporate Partner, Helen Mather discusses The Economic Crime and Corporate Transparency Bill.

The Economic Crime and Corporate Transparency Bill was given Royal Assent on the 26th of October 2023. Even though the new Economic Crime and Corporate Transparency Act 2023 does not itself deal with the question of corporate directors, the Government has long made it known that it sees corporate directors as part of the toolkit for criminals allowing them to use opaque corporate structures for nefarious purposes.

The Government has confirmed that banning corporate directors remains a focus for it as part of its wider strategy (of which the Economic Crime and Corporate Transparency Act 2023 forms part) to transform corporate transparency and reduce economic crime.

The Small Business, Enterprise and Employment Act 2015 made amendments to the Companies Act 2006 requiring that all directors are natural persons and prohibiting the appointment of corporate directors, but these amendments have not yet been brought into force.  The Government also still needs to make regulations setting out any exceptions that are to apply to this general rule and therefore in what circumstances corporate directors will be permitted.  Both are actions the Government has indicated it intends to progress with.

Its not provided for in the Economic Crime and Corporate Transparency Act 2023, but the Government has confirmed to coincide with the Act that it remains committed to bring into force these existing powers to place restrictions on the use of corporate directors.

The Government has also made it clear that as part of this reform it intends to ensure that:

• every director of a permitted corporate director must be a natural person who have had their identity verified under the new identity verification requirements being brought in by the Economic Crime and Corporate Transparency Act 2023;
• and only corporate bodies with “legal personalities” (such as registered companies and limited liability partnerships) will be able to be permitted corporate directors.

It is not known when these long predicted changes will be implemented and it is expected there will be a period of 12 months once they are in order to allow companies to comply but in the meantime, the Government has re-confirmed its intention to make the reforms happen. Given the broader context including the current focus on the Economic Crime and Corporate Transparency Act 2023 it finally seems possible this will happen in the relative short term.

Please contact a member of our corporate team if you would like any assistance with the Economic Crime and Corporate Transparency Act 2023, corporate directors or otherwise in relation to your company.