The Economic Crime and Corporate Transparency (ECCT) Act has given Companies House sweeping new powers of enforcement in the fight against money laundering, fraud and other economic crime. These powers are aimed at improving the integrity of the register and ensuring that companies can be held accountable for breaches of compliance and lawfulness. Here we present what we know about the Registrar’s new powers at the time of writing (November 2023, with the Act recently passed).
With her newly expanded remit, the Registrar is no longer a passive librarian. She will be able to actively police the register of companies and bring the law to bear on companies and their officers for suspected wrongdoing.
How the new powers will affect the running of companies and LLPs will potentially be clarified via secondary legislation. But since the Act’s primary legislation represents a major shift in Companies House’s role, it is as well to become familiar with the consequences of this new stance. Now is the time to start thinking about how it will affect the running of companies and LLPs. Here is a short guide to how the important role of Registrar of Companies is changing.
The registrar’s new objectives
The Act gives the Registrar four new objectives:
- Ensuring that anyone who has to deliver a document to the Registrar does so and does so in compliance with all requirements for proper delivery
- Taking action to ensure that information in the register is accurate and complete
- Ensuring that information on the register is not false or misleading
- Preventing companies from acting unlawfully and from facilitating others to act unlawfully.
The registrar’s new powers
To assist her in reaching these objectives, the Act gives her new powers. Broadly, they are:
- Requiring additional information in relation to Companies House filings
- Sharing information with public authorities and law enforcement agencies where this assists Companies House’s functions
- Removing information from the register if it is found to be erroneous, fraudulent or misleading
- Changing a company’s registered office address if it is not an appropriate one (one where Companies House can be confident that communications will be received and come to the attention of company officers)
- New powers on company names
- Analysing information on the register for the purpose of detecting or preventing crime.
- Directly imposing financial penalties for breaches of the Companies Act 2006.
We’ll now take a closer look at each of these powers.
Requiring additional information
Until now the Registrar has been required to accept information as long as it is correctly delivered to Companies House. The Act gives the Registrar the power to reject and query new filings and query previously delivered information.
The Registrar may write to a company officer or other person requiring additional information to determine whether:
- A required document has been delivered
- It was delivered in compliance with the requirements for proper delivery
- It is necessary to require them to resolve inconsistencies between the contents of the document and existing material on the Companies House register.
Those presenting information to Companies House will have to be prepared to back up their submissions with further information if they are queried by the Registrar.
The Registrar will be able to exercise discretion in querying submissions. She is likely to prioritise those cases judged to present the most risk to the integrity of the register and by extension the country’s wider economic wellbeing.
According to the Registrar’s own blog, querying will only take place for registered companies. Those applying for registration will see any erroneous submissions rejected along with a reason for rejection. They may then re-submit. Rejection will continue until everything is correct, compliant and properly delivered.
Registered companies will be given a time limit within which to respond after a query is raised. When that period has elapsed the Registrar may either impose sanctions or extend the period where appropriate.
Companies House will issue further guidance on how the new querying power will be used in practice, along with examples of what will constitute appropriate evidence.
Sharing information
The Act gives Companies House new powers to disclose company data. It can share information with regulatory and supervisory bodies, law enforcement, government departments and insolvency practitioners to assist them in achieving their objectives. Conversely, anyone is empowered to share information with Companies House to assist it in carrying out its own functions.
Much of this activity will be focused on tackling large scale economic crime and is unlikely to impact the day to day running of small companies.
Removing information
Having exercised the power to require additional information, the Registrar has the new discretionary power to remove material if, in her view, it facilitates fraud or other economic crime and/or undermines the quality and coherence of information on the register. Material that the Registrar can remove includes material that has been previously accepted despite not meeting requirements for proper delivery.
Changing a company’s registered office address
If the Registrar considers that a registered office address is not appropriate according to the definition in the Act (‘… an address where, in the ordinary course of events, a document addressed to the company, and delivered there by hand or by post, would be expected to come to the attention of a person acting on behalf of the company’), she has the power to change the company’s registered office address. She also has the power to require an appropriate email address that is defined in the same way as an appropriate office address, i.e. emails sent to it can be expected to come to the attention of company representatives. She will be able to repeatedly require a company to change their registered email address until she is satisfied it is appropriate.
New powers on company names
Until now restrictions on company names have been sensible but limited. Reasons for a company name being disallowed have included:
- being too similar to an existing name
- implying a connection to the government
- containing sensitive words or expressions.
The Registrar has been powerless to refuse or change company names that comply with these rules yet still have potential for misinterpretation.
The Act gives the Registrar powers to prevent the registration of a company name if, in the Secretary of State’s view, it:
- suggests a connection, where none exists, with a foreign government or international organisation
- comprises or contains computer code (because it can corrupt data on the register)
- is suspected of being used for criminal purposes outside the UK.
The Secretary of State can direct a company with an existing name that is in breach of these rules to change it. If it fails to do so within 28 days it will be guilty of an offence punishable by a fine of up to £1,000. In such cases the Registrar will have the power to change the company’s name to its company registration number.
The Act also contains provisions to prevent companies from re-registering under the same or similar name when they have been directed to change their name. Neither can such companies’ directors and shareholders use the same or similar name to form another company.
The Registrar will begin dealing with some cases that would previously have been dealt with by the company names adjudicator (CNA) under her new querying power.
The above changes regarding company names will require secondary legislation and Companies House system development before coming into effect.
Analysing information on the register
The Registrar has a new power to analyse information on the register for the purposes of preventing or detecting crime. This is different from her previous role as a passive recipient of information. Now she can conduct ‘forensic’ analysis of companies’ data and share it with law enforcement agencies such as the National Crime Agency.
Financial penalties
Currently most penalties for non-compliance with the Companies Act 2006 are dealt with by the criminal justice system. But following the ECCT Act, the government that will offer the Registrar an alternative to pursuing offenders though the courts. The Registrar will gain the power to impose these penalties directly for conduct that amounts to an offence under the Companies Act 2006. She is most likely to use this power when it represents the most appropriate use of resources. Pursuit through the criminal courts will likely be reserved for the most serious cases. The Registrar will be the decision maker on whether to impose a direct civil penalty or pass the case to law enforcement for criminal prosecution.
The government plans to strengthen the link between civil penalties and director disqualification by amending the Company Directors Disqualification Act 1986 and Articles 6 and 8 of the Company Directors Disqualification (Northern Ireland) Order 2002. This will make it easier for directors to be disqualified for persistent breaches of companies legislation on the grounds of the financial penalties they have incurred.
We work directly with Companies House to keep Inform Direct up to date with legislative and administrative changes.