Since its assent in October 2023, the Economic Crime & Corporate Transparency Act 2023 (the “ECCTA”) has introduced lots of new legal changes for businesses – with more fast approaching – and with Companies House already using its new powers.
Companies House has now unveiled a new approach to financial enforcement; introducing new fines and taking a more proactive approach to non-compliant businesses.
To avoid falling foul of these latest developments (set out below) arrange a discussion with our Business Crime team today.
Companies House Enforcement
The ECCTA made a variety of enforcement methods available to Companies House, including:
- Ability to query, reject, or directly amend information
- financial penalties
- civil action
- criminal prosecution and
- director disqualification.
To guide businesses on how they plan to use these new powers, Companies House have now published its Enforcement Policy (the “Policy”).
The Policy emphasises a “firm, but fair” approach to enforcement action. In carrying out enforcement activities, they will apply various guiding principles, such as:
- proportionality regarding the application of law and securing compliance
- ensuring cases that cause significant harm receive their most serious powers and sanctions
- targeting their enforcement action
- consistency in their approach
- transparency of how they operate and what to expect; and
- accountability for their actions.
The Policy has a key focus on proportionality, ensuring that any enforcement action taken is:
- proportionate to the likelihood of any harm and its severity and
- informed by the compliance behaviour of a company.
If Companies House identify a breach, it will then proceed based on a company’s compliance behaviour, which will place a company in one of five levels, ranging from Level 1: Compliant to Level 5: Seriously or serially non-compliant.
You should aim to keep your company in ‘Level 1’ so that, should any breach occur, you are already in good standing with Companies House. Suppose Companies House detect issues or recurring patterns that increase in frequency or severity. In that case, it can escalate their response with stronger measures, whilst using their most significant powers immediately in serious cases.
We can assist and advise you to ensure your business remains within Level 1: Compliant.
Financial Penalties
Following secondary legislation to the ECCTA which came into force on 2 May 2024, Companies House now has the power to impose financial penalties if it is satisfied, beyond reasonable doubt, that a business engaged in conduct amounting to a ‘relevant offence’.
The penalty imposed will depend on the type of offence committed, but will be one of:
- a fixed penalty: a set amount based on the offence, previous behaviour and other factors
- a daily rate penalty: a daily penalty for each day that the offence continues or
- a combination of both.
The scale of fines
For the most serious of offences, the penalty starts at £750 and can increase up to £2,000 for repeat offenders, with minor offences carrying penalties from £250 and ranging up to £1,000.
As detailed above, Companies House will take into account the previous compliance behaviour of a company and the seriousness of the offending.
A business will be given the opportunity to respond to any penalty notice, and the possibility of (court granted) permission to appeal. We can guide you through this process if necessary (and avoid it becoming a possibility).
Upcoming changes
One year on since ECCTA received Royal Assent in October 2023, and the scale of incoming reform continues to grow. In their Outline Transition Plan, Companies House set out the changes expected over the next 18 months, dependent on parliamentary timetabling. Changes will include greater strike off powers for Companies House, the registration and scrutiny of authorised corporate service providers (ACSPs), access on request to certain trust information overseas, the new ID verification regime and more.
How can we help?
Our specialist Business Crime & Investigation team can assist you in preparing for these changes and minimise the risk of non-compliance. Get in touch with our team of expert lawyers for bespoke advice. Sign up to our ECCTA hub for the latest updates.
