Corporate transparency reforms spell major change for UK pension trustee companies

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) became law last October and makes changes to company law and procedure that affect all companies registered in the UK.

All trustee companies, including independent professional trustee companies, need to be aware of the changes and consider taking action. Some new requirements have been in place since March and other major changes are expected in the months to come.

Companies House's more active role

The key aims of the reforms made by ECCTA include improving the integrity of the information on the Companies House register, helping in the fight against corporate crime and improving corporate transparency.

To support this, Companies House has been given a new, more active role. For example, the registrar was given new powers and enforcement tools on 4 March 2024. It can now query and reject filed documents, run stronger checks on company names and change unsuitable names, strike off entities incorporated with false information, correct documents and remove misleading information from the register, and analyse and share information for the purposes of crime prevention or detection.

Three new requirements already apply

Since 4 March this year, new and existing companies have been required to have an "appropriate address" as their registered office. "Appropriate" means, for example, that any documents sent to the registered address should be expected to come to the attention of a person acting on behalf of the company. PO Box addresses can no longer be used.

There are also new obligations to provide Companies House with an appropriate registered email address that it can use to communicate with the company and to give an annual "lawful purposes" statement.

More changes on the way

There are further new requirements on the way under ECCTA including for identity verification and Companies House filings, as well as a ban for corporate directors and changes to accounts, registers and incorporation requirements.

Identity verification

There will be a new requirement for all existing company directors and people with significant control (PSCs) or a relevant officer of relevant legal entities (RLEs) to verify their identity; that is, to prove to Companies House that they are who they say they are. (PSCs and RLEs are, effectively, individuals or entities that exert significant influence or control over an entity.) Where a company is a director, all of the directors of that company will need to be verified.

There will be a transition period to get verified and there will be two ways of doing so: complete the process oneself using a digital identity verification service to be set up by Companies House or have one's identity verified by an authorised corporate service provider (ACSP) that then makes a "verification statement" to Companies House.

Identity verification will also apply on the incorporation of a new company and at the point of any change in an existing company.  For example, when new directors are appointed or when there is any change to PSCs, RLEs or the relevant officer of an RLE.

In what will be a significant change, a new director will need to get their identify verified before they start to act as a director and before their appointment is notified to Companies House. It might not be possible for them to act until their appointment has been notified to Companies House.

If there are changes in PSCs, RLEs or an RLE's relevant officer, the company will have the option to include in its filing notifying that change to the registrar that the PSC or relevant officer of an RLE has been verified. If they do not, then Companies House will still register the change but will require the individuals to get verified and provide a statement confirming that they have been within a fixed time. If they do not do so, an annotation will be added to the register to state that the person is unverified. The annotation on the register will remain in place until such time as the person's identity has been verified.

Companies House filings

Identity verification will also affect Companies House filings. When the new rules start to apply, only individuals whose identity has been verified and ACSPs (generally organisations supervised for anti-money laundering purposes by, for example, the Financial Conduct Authority or Solicitors Regulation Authority) will be able to deliver documents to Companies House.

Anyone filing at Companies House will also have to make an "accompanying statement", the contents of which are currently unknown, but it is anticipated that this may mean increased liability for the filer in relation to the contents of the filing.

In practice, this means that if an individual files for themselves, they will need to verify their identity in order to continue to making filings.

If a company employee or officer makes filings on behalf of a company or group, then that employee or officer will need to verify their identity in order to be able to continue to make filings.

If filings are currently made by a third party, the third party will need to be an ACSP if it is to continue to make filings.

Ban on corporate directors

A ban on a company having corporate directors will be brought into force alongside ECCTA. The general rule will be that all the directors of a company must be natural persons. This ban will apply both to new and existing directors, and there will be transitional arrangements.

On first sight, this ban has the potential to cause real problems for independent trustee companies. They are often appointed, as a corporate director, to sit alongside the directors of a trustee company which an employer has set up for a particular pension scheme or schemes.

In some cases, the "corporate tree" of the independent trustee company might also include companies with corporate directors. An exemption is expected if the corporate director is a UK company and all its directors are natural persons who have verified their identity – although this is not guaranteed.

Accounts, registers and incorporation changes

There will be changes to the way that company accounts must be filed (a move to mandatory digital accounts filing via approved software) and, for small companies and micro entities, what must be filed.

The requirements for registers will also change. Although they might still choose to do so, companies will no longer be legally required to maintain a register of directors, a register of directors’ usual residential addresses, a register of secretaries, or a register of people with significant control.

Instead, the focus will be on companies submitting the relevant information to Companies House. This will include a one-off requirement to submit a complete shareholder list.

However, companies should retain a copy of historic registers and will still need to maintain a register of members and ECCTA makes changes to the way in which shareholder details should be recorded in order to improve transparency.

There will also be some additional conditions to comply with when setting up a new company.

Trustee 'action checklist'

There are a range of actions that trustee companies, including independent professional trustee companies, should consider in light of these changes.

• Check the requirements for an "appropriate address" and that your registered office address meets those requirements.
• Include an appropriate registered e-mail address in the first confirmation statement you file after 4 March 2024.
• Include a confirmation that the intended future activities of the company will be lawful in your next, and each subsequent, annual confirmation statement after 4 March 2024.
• Consider an audit of filings to check, for example, for errors, discrepancies and that filings are up to date.
• Prepare for identity verification, remembering that this will apply both to existing and to any new company directors, PSCs and RLEs. Make sure you know who will be co-ordinating this for you when the requirements come into force. Remember that there will be restrictions on when new directors can start to act.
• Review how you will make filings. For example, if another group company files for you, speak to the filer to check how they plan to meet the identity verification prerequisite when it comes into force and that they will continue to file for you.
• Contact the team that prepares your accounts to check they are aware of the upcoming accounts changes.
• Consider suggesting a review of company or wider group structure to understand whether any company has a corporate director and, if so, whether any action is needed.
• Decide whether you wish to keep a local copy of registers such as the register of directors which will be held on the UK companies register going forwards and make sure that all register information is up to date and ready to share with Companies House.
• Make sure that you have all of the shareholder information you will need to comply with the new requirements for a register of members and the submission of the one-off shareholder list.

Osborne Clarke comment

Trustees should be aware that the timings of changes that are "on the way" under ECCTA have been affected by the UK general election and that further detail and guidance are awaited.

Moreover, ECCTA also makes changes that apply to limited liability partnerships and English limited partnerships as well as to UK companies; depending on group structure, it may be also necessary to consider these entities.

And a final action for trustees would be to consider taking legal advice. ECCTA introduces a range of new offences, penalties and enforcement powers that you could engage if you do not meet the new requirements. ECCTA also makes other changes which there is not the space to discuss here.