What is it?
The Economic Crime and Corporate Transparency Act 2023 introduces reforms that will have consequences for directors of UK companies.
One of the most fundamental changes that is being introduced is the concept of ID Verification. Whilst this has not yet been introduced, the changes will require some planning.
Who is it for?
All new and existing directors of UK registered companies.
How does it work?
Once the secondary legislation has been enacted, all new and existing directors of UK companies will be required to verify their ID with Companies House. The information used to verify a director’s ID will be protected information and will not be displayed on the public record.
The requirements for verification will differ depending on whether you are an existing director, or one that is appointed, after the law is changed, during or after incorporation.
Existing Directors: It is expected that there will be a transition period for existing directors to verify their ID. As yet there is very little information on what this timescale is likely to be.
It is anticipated that there will be a portal through which directors can submit a copy of their ID alongside taking a photo of themselves. Likeness matching technology will then be used to verify all of that individual’s appointments on the Companies House Register. This verification will only need to be done once per individual. If you are a director and a PSC, your verification will apply to that PSC appointment as well.
New Directors: For new directors that are appointed after the incorporation of a company, the requirement to verify ID will be before they are appointed.
The new director must confirm to the company that they have verified their ID with Companies House, after which they can then be appointed. If Companies House receive a notification of appointment and the individual has not verified their ID, that appointment will not be added to the register.
If you are a director being appointed during a new incorporation, you will need to verify your ID prior to incorporation; and will be required to provide evidence of successful verification during the incorporation. It is anticipated that verified individuals will be given a unique identifier, which will be evidence that they have been successfully verified.
What else do I need to know?
It will be deemed to be an offence for any individual to undertake the actions of a director if they have not verified their ID with Companies House. It will also be an offence for any individual to act as a director if the company has not submitted notice of their appointment to Companies House within 14 days. Civil penalties, such as fines, may be applied in instances of non-compliance. As a result, we strongly recommend companies take steps to ensure they have evidence of verification before they appoint a new director.
Both current and new directors may prefer to ask a third party to arrange this ID verification for them. An “Authorised Corporate Service Provider” such as an Accountant or Solicitor may be used by an individual to verify their ID and submit a “Verification Statement”. As yet, there is little guidance on what this process will entail, so please do check back here for updates.
What should I do next?
All companies should make sure this new requirement is communicated to all existing directors, and to any new directors they appoint going forwards.
Where there are internal checklists/processes for the appointment of a new director, the company should make sure this new requirement is incorporated into those. Companies should also make sure that all new director appointments are notified to Companies House within 14 days.
Once the legislation comes into force, Companies must ensure that all directors are compliant and have verified their ID. Failure to verify or allowing a director to act as such whilst un-verified will be an offence under the new legislation, punishable by a fine. Similarly, it will also be an offence for a director to act as such in time between being appointed by the company be that appointment being notified to Companies House.
If you have any queries regarding the above or have any other questions, please do not hesitate to contact Charlotte Leslie at 01865 261119 or email.
This article has been updated since its original publication (2 February 2023) to provide accurate and up-to-date information.
Find out more about Charlotte Leslie