What are the requirements?
The ECCTA aims to increase transparency and accuracy by introducing identity verification for:
- all new and existing company directors
- all new and existing persons with significant control (PSC)
- anyone who delivers documents to Companies House on their own behalf or on behalf of another, including authorised corporate service providers (ACSP) (see below)
There are two routes for verification, both of which rely on supplementary regulations being passed:
- Companies House verifies an individual’s identity directly in accordance with the regulations
- an ACSP makes a statement confirming that it has verified an individual’s identity in accordance with the regulations
The role of the ACSP will be key to many companies and individuals whose filings are undertaken by their professional advisers. Accountancy firms and law firms who typically carry out this kind of work will need to apply to become an ACSP, which will require the organisation to be verified by Companies House. In order to qualify as an ACSP, the organisation or individual must be a relevant person for the purposes of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 so overseas entities will generally not be able to conduct identity verification unless authorised by the Secretary of State. Once ACSP status has been approved, the ACSP (through its employees and officers) will then be able to make filings on behalf of an individual or corporate entity provided that the ACSP has conducted its own verification checks on them.
The scope of identity verification envisaged is very broad, encompassing all newly appointed and existing directors (including shadow directors) and PSCs or officers of RLEs. Verification will be carried out digitally although the requirements for verification are not provided by the ECCTA itself and we are reliant on further regulations and guidance from Companies House for details of the final process.
When do they take effect?
Companies House has provided an updated timeline in its Economic Crime and Corporate Transparency Act: outline transition plan.
Once effective, companies will need to provide a statement that the identity of the relevant directors/PSCs has been verified:
- on incorporation
- on the appointment of a new director
- on the notification of a new PSC
What are the consequences of not complying?
A director should not take any actions on behalf of the company until their identity is verified. Continuing to act as a director without being verified will amount to an offence committed by the company and every officer in default punishable by a fine; although, importantly, the actions undertaken by the director will not be invalidated. Directors who persistently act without having been verified may also face disqualification.
What can I do to prepare?
Companies can prepare now by ensuring that their directors are briefed on the upcoming regime and maintaining up to date proofs of address and photo identity on their files ahead of time.
If you would like to explore the company secretarial support we can offer, please contact Cosec@stevens-bolton.com.
Lucy Barnes