At the beginning of March 4, 2024, the UK’s corporate landscape underwent significant changes with the introduction of the Economic Crime and Corporate Transparency Act. It reshapes the way companies operate and interacts with Companies House in the UK. But what are these changes?
In this guide, we will discuss these changes to UK company law to help you ensure the company is operating within legal boundaries by identifying the potential risks.
What Is Company Law in the UK?
UK company law is a comprehensive legal framework that governs the formation and operation, including the dissolution of companies. It establishes the legal framework for how companies are formed and managed—including the responsibilities of those who conduct them. This area of law includes:
- Regulations on company formation.
- Shareholder rights.
- Director’s rights.
- Reporting requirements.
- And corporate governance.
Mainly, the Companies Act 2006 is the primary piece of legislation that outlines the rules and guidelines companies must follow in the UK. However, the Economic Crime and Corporate Transparency Act 2023 is a more recent piece of legislation that amends and builds upon the Companies Act 2006. Over the next few years, this will implement a number of changes to UK company law.
Why Do You Need to Be Aware of UK Company Law?
Whether you are a person with significant control (PSC), a company director, or the individual who files on behalf of a company, understanding UK company law is crucial for anyone running the business world. Here’s why:
- Compliance: Knowing the latest regulations helps your business stay legal, avoiding penalties and legal troubles.
- Risk Management: The insight of company law lets you spot potential risks and create effective strategies to handle them.
- Decision Making: A grasp of legal implications empowers you to make smart, informed decisions for your business.
- Corporate Governance: Good governance practices are key to your company’s reputation and success. Company law provides the guidelines for achieving this.
- Business Growth: Understanding company law can open doors to various corporate structures and funding opportunities, supporting your business’s expansion.
By mastering UK company law, you’re setting up a strong, informed foundation for your business’s future.
What Are the Changes to UK Company Law 2024
Now that you know the necessity of learning about company law, let’s focus on the main point: the changes in UK company law in 2024.
1. Significant Changes in Fee
The changes in fees are the most crucial part of the broader updates to UK company law effective in 2024. These fee increases impact various processes, including the formation of companies and LLPs, registration of overseas entities, and submission of confirmation statements. The new fees are as follows:
Formation Costs: Online formation of a limited company or LLP has been increased from £10 to £50. Same-day online incorporation has risen from £30 to £78.
Existing Companies: Changing a company name online now costs £20. Submitting a confirmation statement online has increased from £13 to £34. Whereas the same-day share capital reduction will now cost £136 instead of £50.
In order to improve monitoring and enforcement, Companies House was given further authority by the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which is reflected in these modifications. To learn more about the Companies House fee updates, check out our blog:
“UK Companies House Fees on the Rise: What You Need to Know.”
2. Requirement for an ‘Appropriate Address’ as Registered Office
Starting 4 March 2024, every UK company must ensure its registered office is at an “appropriate address.” This means the location should be one where documents can be reliably received and acknowledged—effectively ruling out PO boxes. Companies using inappropriate addresses risk having them changed to UK Companies House, with potential penalties for non-compliance.
3. Requirements for a Registered Email Address
In a move towards modern communication, all companies will need to provide a registered email address. This email won’t be public but will be used by Companies House for official correspondence. New companies must include this during incorporation, while existing companies should update their details in their next confirmation statement.
4. New Statement of Lawful Purposes
Another crucial obligation is for companies to confirm that their activities are lawful, effective March 4, 2024. Both new and existing companies must include this confirmation during incorporation or in their annual confirmation statements.
5. Shift to Software-Only Filing of Annual Accounts
Companies House is shifting towards a software-only filing system for annual accounts, phasing out traditional methods like WebFiling and paper submissions. While over 65% of companies already use software for filing, this change will be gradually introduced over the next two to three years, with full implementation expected later.
6. Changes to Small Company Filing Options
Small companies and micro-entities will face streamlined filing requirements. Key changes include the mandatory inclusion of a profit and loss account and a director’s report in annual accounts, enhancing transparency. These measures will roll out over the next few years, simplifying compliance while providing clearer financial information to the public.
7. Audit Exemption Adjustments
Companies claiming audit exemption will need to include a new statement on their balance sheet, identifying which exemption they are claiming (e.g., small company, dormant). This requirement will be introduced over the next two to three years and applies to any company seeking to file unaudited accounts.
8. New Identity Verification Requirement
To combat fraud, identity verification will become mandatory for all company directors, secretaries, and significant controllers. The exact date for this change is yet to be confirmed, but it will be phased in after secondary legislation is passed.
9. Personal Information Suppression at Companies House
In a move to protect personal data, individuals will soon be able to request the suppression of certain personal details from the public register. This change will be introduced over the next two years, allowing individuals to safeguard their privacy better.
10. Enhanced Rules for Limited Partnerships
Limited partnerships will face new transparency requirements, including identity verification for general partners and the provision of more detailed information. These changes will also apply to Scottish limited partnerships and will be phased in following new legislation.
11. Shareholder Information Requirements
Companies must now record and submit a complete list of shareholder names in their registers. Members are required to provide this information within two months of joining a company or changing their registered details.
12. Additional Transparency for PSCs and RLEs
Companies exempt from providing PSC information must now state the reason for their exemption. Additionally, where a PSC is an RLE, companies must outline the conditions that allow this entity to be recorded as a person with significant control.
13. Restrictions on Corporate Directors
New restrictions will limit the use of corporate directors to UK entities with legal personality, with all directors of such entities being natural persons. These directors must complete identity verification before their appointment.
These changes to UK company law represent a significant shift in how UK companies operate, with a clear focus on transparency, accountability, and compliance. Staying informed and adapting to these new requirements will be crucial for businesses to thrive in this evolving legal landscape.
14. Increased Transparency of Certain Internal Company Registers
The abolition of certain internal company registers is one of the key changes to UK company law 2024. Companies no longer need to maintain records according to the Economic Crime and Corporate Transparency Act for the following:
- Register of directors.
- Register of company secretaries.
- Register of people with significant control (PSC register).
- Register of directors’ residential addresses.
Instead, these records must be held on the public register at Companies House. Companies will still need to keep a register of members internally. This shift towards greater transparency aims to make it easier to identify company ownership and directors.
How Does Business Globalizer Keep You on Track?
Wondering how to stay ahead in the complex world of company law? Business Globalizer has got you covered. We simplify the intricacies of company formation and compliance by providing expert guidance tailored to your needs.
From understanding director roles and responsibilities to maintaining legal requirements, our comprehensive resources and personalized support ensure you stay compliant and focused. With us, you get clear, actionable advice and practical solutions, so you can concentrate on growing your business with confidence.
Final Words
As the landscape of UK company law evolves in 2024, are you prepared to stay ahead? Understanding these changes to UK company law is quite essential for maintaining compliance and making informed business decisions. From the new requirements for registered addresses and email communication to changes in annual filings and identity verification, being proactive is key.
So, get ready for changes to UK company law without any difficulty with Business Globalizer.
