The Economic Crime and Corporate Transparency Act represents one of the most significant reforms to the UK’s corporate regulatory landscape in recent years. The Act makes a significant shift in the UK’s approach to tackling economic crime and strengthening the integrity of the UK’s business environment. This legislation builds on the foundations laid by the Economic Crime (Transparency and Enforcement) Act 2022, seeking to now increase and bolster corporate transparency in the UK.
One of the most consequential aspects of the Act is the introduction of mandatory ID (identify) verification for individuals associated with UK companies, with Companies House estimating that more than 7 million people will be affected. This new requirement has far reaching implications for directors, PSC’s, and those interacting with Companies House on behalf of corporate entities.
A modernised approach to corporate transparency
Historically, company formation in the UK operated on a trust based system. Directors and controllers could be listed with little scrutiny from Companies House. This left the register open to potential abuse and it undermined confidence in the UK’s business environment. Under the Act, company formation is being updated to meet modern standards of verification and accountability. The reforms are part of a broader effort to modernise the company register and bring it in line with the demands of a 21st century economy, ensuring that those who manage or own UK companies can be clearly and reliably identified.
Who will be required to verify?
The new identity verification obligations apply to a wide group of individuals, including:-
- Company directors (for all corporate entities, including limited companies and limited liability partnerships);
- Persons with Significant Control (PSC’s) (being individuals who own or control more than 25% of a company’s shares or voting rights);
- Relevant officers of Registered Legal Entities (RLE’s) of a company or a limited liability partnership;
- Members of a limited liability partnerships;
- Nominated directors of corporate general partners of limited partnerships;
- Individuals who are Authorised Corporate Service Providers (ACSPs); and
- Those persons delivering documents to Companies House.
How will verification work?
The verification process will be managed by Companies House and conducted either:-
- Directly via Companies House (via the GOV.UK ID Check App, GOV.UK One Login Webb Channel and GOV.UK One Login Face to Face service. This involves submitting official identification documents and completing a biometric match process); or
- Verification by ACSPs (regulated entities such as law firms, accountants, and company formation agents, who will be allowed to verify identities on behalf of clients).
Once verified, individuals will be issued a unique identifier to use in future filings. This identifier will be used in all filings to confirm the individual’s verified status. Unverified individuals will not be able to be appointed as directors or submit future filings to Companies House. This change gives Companies House enhanced power to refuse, query, or reject submissions where identity requirements are not met.
Implementation timeline
The Act received Royal Assent on 26 October 2023, and it will come into force in stages, namely:-
From 18 March 2025: ACSP’s were able to register at Companies House.
From 8 April 2025: Individuals were able to voluntarily verify their identity.
By Autumn 2025: Identification verification will be made compulsory on incorporation for new directors, LLP members and new PSC’s. A 12-month transition period will begin to require identification verification for existing directors, LLP members and PSC’s.
By Spring 2026: IDV will be required for presenters filing any document and corporate general partners of limited partnerships. In addition, third-party agents filing on behalf of a company will be required to be registered as an ACSP.
By the end of 2026: The 12-month transition period requiring identification verification will be completed and compliance activity will be started against those who have failed to complete verification. The implementation of identification verification for limited partnerships will also start to come into force.
Consequences of non-compliance
Failing to comply could be a criminal offence and result in criminal sanctions or civil penalties, including:
– Criminal Proceedings which could result in a level 5 fine (no stated limit);
– Registrar of Companies-imposed civil penalties;
– Rejected filings for new incorporations and registrations; and
– Rejected statutory filings.
It is also a criminal offence for any person to provide misleading, false or deceptive information to Companies House ‘without reasonable excuse’, which attracts an unlimited fine. Not only this, a new aggravated criminal offence has been introduced for knowingly providing misleading, false or deceptive information, punishable with fines and potential imprisonment for a maximum of two years.
The message is clear; identity verification is not optional, and enforcement will come by way of new and strengthened powers.
Conclusion
The identity verification requirements under the Act represent a significant shift in how UK companies are governed and regulated. While the aim is simple; improving transparency, the practical implications for businesses are considerable. By placing greater emphasis on accountability and transparency, these reforms aim to reshape how companies are managed and how information is recorded. As Companies House moves towards implementation, identity verification is set to become a defining feature of corporate life in the UK.
If you need any advice with regard to this topic or Corporate and Commercial law generally, please do not hesitate to contact our team on 01484 821 500. Alternatively, you can email us at [email protected] and a member of our team will be in touch.
The above article is for illustrative purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any part of the information given.
Furthermore, the information contained is accurate and up to date as of the date of publication. Readers should be aware that legislative frameworks may have been amended since the original date of publication.
