As the upcoming Economic Crime and Corporate Transparency (ECCT) Bill makes its way through Parliament, there are a number of proposed changes to be introduced that will have a wide-ranging impact on UK businesses.
Companies House – no longer simply an online library
The ECCT Bill recognises the inherent limitations of the role played by Companies House in simply collecting and publishing data. The Bill looks to change the role of Companies House to one which is responsible for improving the integrity of public documents.
The Bill seeks to address this by listing four objectives of Companies House:
Objective 1
To ensure that any person who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with).
Objective 2
To ensure that documents delivered to the registrar are complete and contain accurate information.
Objective 3
To minimise the risk of records kept by the registrar creating a false or misleading impression to members of the public.
Objective 4
To minimise the extent to which companies and others— (a) carry out unlawful activities, or (b) facilitate the carrying out by others of unlawful activities.
The ECCT Bill introduces a number of new powers to Companies House to enable it to achieve these objectives. These relate to both existing held data and future submissions and include the power to:
- remove information from the register that has previously been accepted
- change a company’s name or registered address
- reject, query or request further supporting information on filings with inconsistencies to existing held data
- require delivery of documents by electronic means
- impose financial penalties for Companies Act 2006 breaches
It’s clear from the objectives that have been set that the processes and work undertaken will increase significantly. Companies House operates on a cost recovery basis and fees are reviewed annually to ensure it is adequately funded.
With the last fee increase being in 2016, Companies House has recognised the fees going forward would be expected to increase. Although at this stage, it’s too early to tell to what extent this will be.
Changes to small and micro company accounts
The Bill introduces changes to the filing of small and micro company accounts.
Compulsory filing of profit and loss accounts
Small and micro companies will be required to file both their profit and loss and balance sheet. The inclusion of the profit and loss is a significant increase in small company reporting transparency and will no doubt have significant implications on stakeholder interest in the financial statements.
Companies need to consider the impact this could have on each stakeholder group. Particularly those who may not have previously had visibility of the full financial statements, such as competitors, suppliers, employees and customers.
Filing of directors’ report
The ECCT Bill now requires small companies not preparing accounts under the micro entities rules to file a directors’ report. Companies can still choose to prepare directors’ reports under the small companies rules, which provide exemptions from the disclosure of dividends and a business review.
A look further ahead – filing of statutory accounts
As noted above, part of the powers the Bill introduces for the registrar is the ability to mandate electronic delivery of documents. While neither the Bill nor Companies House have yet indicated if this will remove the opportunity for financial statements to be submitted in paper format, it is expected that the new powers are paving the way for this to be introduced in the not-so-distant future.
With the Bill expected to receive Royal assent in 2023, we will keep you up to date on the changes and what they specifically mean for you and your business. In the meantime, if you have any questions or require any advice, please get in touch with your usual BHP contact, a member of our Digital Finance team or call 0333 123 7171.
