Designed to reduce economic crime and support national security by improving the transparency of UK corporate entities, significant reforms to the role of Companies House form the centrepiece of the Economic Crime and Corporate Transparency Act 2023 (ECCTA).
It will introduce some of the biggest reforms to Companies House since company registries establishment in 1844.
As part of a wider legislative package, the ECCTA's primary objective is to prevent the abuse of corporate structures and allegedly award the registrars a stronger role in making the UK "a great place to do business".
Targeted at companies, limited partnerships, other types of corporate entity, and the registration of overseas entities, it further aims to enhance the integrity of the UK's corporate landscape by providing more accurate information on the public register.
The ECCTA reforms come into force in stages.
Arguably, their central objective is to enable the transformation of Companies House from being a passive collector of information to an active gatekeeper, which is equipped with robust powers to combat financial crime and further ensure the accuracy of company data.
Notably, the ECCTA creates a new corporate criminal liability offence of failure to prevent fraud.
A cornerstone of the ECCTA reforms is the mandatory identity verification (IDV) of individuals who are involved in UK companies.
The ECCTA introduced new IDV requirements for anyone setting up, running, owning or controlling a company in the UK, this includes all new and existing company directors (together with their equivalents for other entities), persons with significant control (PSCs) and those who file information with Companies House on their behalf, authorised corporate service providers (ACSPs).
These ACSPs are individuals or organisations (solicitors, accountants, chartered secretaries and governance professionals) that undertake anti-money laundering (AML) supervised activity, such as company formations.
Accordingly, ACSPs will need to register as agents separately with Companies House before being able to conduct identity checks.
To become an ACSP, agents must be supervised by one of 25 UK supervisory bodies, such as HMRC, the Financial Conduct Authority, or the Insolvency Practitioners Association.
By ensuring that individuals really are who they claim to be, this IDV process aims to prevent and deter the misuse of corporate structures for illicit activities.
This would make it more difficult for third parties to fraudulently use the identity and goodwill of certain individuals who act as directors to incorporate companies without their consent or use the addresses of others residential homes, empty properties or even street names that do not exist.
For example, in 2023 a Cardiff flat owner received tax bills amounting to around £500,000 for 11,000 different companies after they had fraudulently used his address to register for VAT.
However, what effect this new process shall have on the completeness, accuracy and legal compliance of documents delivered to Companies House is uncertain and (if any) likely only to be evident in the upcoming years.
From April 8 2025, individuals will be able to voluntarily verify their identity.
Companies House anticipates that the new IDV process as a mandatory requirement will commence by autumn 2025, although no set date has yet been established and may be subject to change; all directors and PSCs for new incorporations will be required to verify their identity at the point of incorporation.
Additionally, a transition period of 12 months will apply for existing companies registered in the UK, where it will be required to provide IDV credentials for their directors and PSCs when their confirmation statement is due.
It is not hyperbolic to suggest that the enhanced
role of Companies House and the introduction of IDV mark a pivotal
shift in UK corporate governance.
Third-party individuals and organisations (ACSPs) that file on behalf of companies are also impacted: prior to filing, anyone who submits information to Companies House on behalf of a company must also complete the same IDV requirements.
Information about how these IDV requirements will operate in practice was not provided by the ECCTA or Companies House, and remain unclear.
Instead, details on the process have been detailed in secondary legislation.
The framework around IDV centres on the registrar's (identity verification by the registrar) rules 2025, which outline how to complete IDV directly via the Companies House portal, alongside relevant evidence that is required for an application to be submitted.
To complete Companies House IDV, there will be three alternative routes:
- a selfie option through the GOV.UK ID Check app available on smartphone;
- an online series of security questions via the GOV.UK login web service; or
- submitting evidence via the online portal combined with physical document checks during a verification appointment at a local Post Office.
Created on January 24 2025 and in force on February 25, the registrar (identity verification and authorised corporate service providers) regulations 2025 includes provisions concerning the verification, or reverification, of an individual's identity and the requirements for ACSPs.
By defining an ACSP's approach to the verification of identities, they aim to provide a consistent, reliable benchmark standard for IDV across all ACSPs that matches IDV checks that are completed by going directly to Companies House.
These regulations are further supplemented by the registrar's (requirements applicable to applications to become an authorised corporate service provider) rules 2025. Designed to streamline the application process, they specify the criteria and procedures for applying to become an ACSP.
Companies House aims to facilitate a straightforward verification process through two primary routes: digitally, or via an ACSP that delivers a verification statement.
Direct verification with Companies House is a predominantly digital service that will link individuals to their primary identity documents, such as a passport or driving licence, using scanning and likeness-matching technology.
Alternative methods will be available for those who are unable to access the digital service.
Since March 18 2025, Companies House has allowed trust and company service providers and other professional service providers (such as accountants and solicitors), who are registered for AML with a supervisor in the UK, to register to become an ACSP.
Before facilitating company formations or filings, ACSPs must register with Companies House, confirming their supervisory status.
The consequences of non-compliance will depend on the circumstances.
For example, failure to comply with the IDV requirements could potentially result in:
- Unverified status: Companies House will annotate the register to reflect individuals with an unverified status, potentially impacting upon the company's credibility and operations.
- Legal sanctions: Both criminal and civil penalties may be imposed on those who fail to verify their identity within the stipulated timeframe, which could result in a fine.
- Rejection of filings: Incorporations/registration of a new company could be rejected and, in the case of existing companies, they may be unable to make statutory filings.
- Prohibition from acting: For company directors, this could also result in being prohibited from acting as a director.
To ensure compliance with the ECCTA reforms, companies need to take proactive measures.
They should review, assess and, if necessary, revise their internal protocols and procedures in order to align with the new IDV requirements.
Given the continued evolution of regulatory requirements and the anticipated changes coming, it is imperative to monitor regular updates from Companies House and relevant regulatory bodies to remain compliant.
Businesses might also consider collaborating with ACSPs in order to streamline the verification process and ensure adherence to compliance obligations.
It is not hyperbolic to suggest that the enhanced role of Companies House and the introduction of IDV mark a pivotal shift in UK corporate governance and a step in the right direction for the registrar.
In response to these changes, businesses must adapt promptly, implementing robust compliance frameworks that effectively navigate the rapidly evolving regulatory environment.
Although the reforms may act as a deterrence for the filing of fraudulent documents from parties unknown, it may have little impact on the documents delivered by a company itself.
Thus, it may be inflated to suggest that these new IDV requirements would fully deter illicit activity.
Companies House is required to register all documents that have been delivered to the registrar in apparent legal compliance, the onus here is on the said company to provide accurate information and for the presenter to ensure the documents delivered are complete, accurate and in compliance with the law for the public record.
These major reforms of Companies House should not be diminished; however, it should be kept in mind that the registrar does not have the power to verify the information on the register and operates largely on a self-reporting basis.
Despite there being no routine proactive enforcement or automatic system for detecting anomalies, meaning fraudulent companies can remain on the register for years, the IDV should hopefully prevent such fraudulent companies from being incorporated going forward.
Overview of the ECCTA
The Economic Crime and Corporate Transparency Act 2023 introduces significant reforms aimed at tackling economic crime, strengthening corporate accountability, and enhancing the integrity of the UK's business environment. It does this through major changes to company law, corporate criminal liability, and the powers of Companies House.
Key provisions of the act
1. Companies House Reforms
- New powers for Companies House to verify identities of company directors and beneficial owners.
- Companies House can now query information, remove inaccurate data, and share data with law enforcement more easily.
- Introduction of mandatory identity verification for all company directors, PSCs (people with significant control), and those filing on behalf of companies.
2. Corporate transparency and filing reforms
- Tightening of rules around company formation and annual filings.
- Companies must maintain a valid registered office address and provide an appropriate email address.
- Introduction of new rules around limited partnerships, aimed at reducing their misuse (especially Scottish Limited Partnerships).
3. Corporate criminal liability
- Introduction of a new failure to prevent fraud offence (similar to the Bribery Act's approach).
- This applies to large organisations and holds them liable if an employee commits fraud for the organisation's benefit and the organisation failed to prevent it.
- Expansion of the identification doctrine – making it easier to prosecute companies by broadening the definition of who is considered the "directing mind and will" of the company.
4. Information sharing and intelligence gathering
- Enhanced powers for law enforcement and Companies House to share information more freely.
- Improved tools for investigating money laundering, fraud, and kleptocracy.
5. Cryptoasset-related reforms
- Strengthened law enforcement powers around cryptoassets, including quicker seizure, freezing, and recovery of assets related to criminal activity.
Who does it affect?
- All UK companies, limited liability partnerships (LLPs), and limited partnerships.
- Company directors, company secretaries, and beneficial owners.
- Large organisations at risk of liability under the failure to prevent fraud offence.
- Professional services firms involved in incorporation or compliance services.
Originally published by FT Adviser, 7 April 2025.
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