Under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), all directors of companies, members of Limited Liability Partnerships (LLPs), general partners of Limited Partnerships (LPs), persons with significant control (PSCs), relevant officers of registrable legal entities (RLEs) and persons registering companies or filing information with Companies House are required to have their identity verified. See our previous articles discussing the changes brought by ECCTA, here: The Economic Crime and Corporate Transparency Act (ECCTA) and the Companies House Reforms – Michelmores and ECCTA and Companies House Reforms – Horizon Scanning for 2024 through to March 2025.
On 23 May 2024, the draft Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 (Regulations) were published, together with a draft Explanatory Memorandum having been submitted to Parliament on 22 May 2024. However, the recent General Elections have put a hold on any progression of the draft Regulations within Parliament. Subject to the Parliamentary timetable and passage of secondary legislation, Companies House anticipate that Authorised Corporate Service Providers (ACSPs) will be able to register this winter; Identity Verification (IDV) will commence during the first half of 2025 and Limited Partnership reforms will be introduced during 2026. More can be read about the Government’s implementation process through the Progress Report: Progress report on the implementation and operation of Parts 1 to 3 of the Economic Crime and Corporate Transparency Act 2023 (publishing.service.gov.uk)
In this article, we will explore the new provisions made by the draft Regulations released by Companies House (DRAFT Registrar’s Rules under Regulation 6 of the IDV and ACSP SI 2024 (companieshouse.gov.uk), in relation to the IDV procedure, highlighting the types of information and evidence an individual or an ACSP will need to verify a person’s identity, and we will summarise how your company can prepare for when the scheme comes into effect. The three main provisions are as follows:
IDV
Before the draft Regulations were released and as set out in s.65 ECCTA, it is envisaged that there would be two ways in which IDV would be carried out: 1) directly via Companies House, by linking a person with a primary identity document such as a passport or driving licence, or 2) indirectly through an ACSP. As defined under s.1098A of the Companies Act 2006 (CA 2006), ACSPs are individuals or organisations that undertake anti-money laundering (AML) supervised activity, such as solicitors or accountants.
Since the release of the draft Regulations, further provisions have been made to the CA 2006 in relation to the procedure for Companies House or an ASCP to carry out IDV. The Registrar of Companies (Registrar) has also released the draft rules (Registrar’s Rules) which mandate the specific information required to verify one’s identity.
Under a new s.1110A CA 2006, an individual’s identity will be verified if:
In addition, PSCs must be ID verified within 14 days of being registered as a PSC with Companies House, whilst RLE’s have an extended period of 28 days of reporting to Companies House that the relevant officer of the RLE has had their ID verified. It is envisaged that there will be a transitionary period for existing directors, PSCs and other registrable entities, to verify their identity. Although there has been no update as to when this transitionary period will be, given that Companies House expect to have introduced the technical capability to verify an individual’s identity by the end of March 2025, a transition process is likely to begin shortly after.
Part 2 of the draft Regulations sets out the evidence that must be included in any application for IDV. To verify an individual’s identity directly with the Registrar, an individual must provide:
The documentary evidence required will also include items such as passport with a biometric chip and UK photocard driving licence.
ACSP
In relation to ACSPs, Part 3 of the draft Regulations provides the framework for the suspension, cessation and termination of an ACSP’s status. As set out in regulations 19 to 22 of the draft Regulations, ACSPs must keep records relating to the IDV checks they complete, and they have a duty to provide information to the Registrar and to update it.
ACSPs failure to provide information under regulation 19 or 21 is an offence (regulation 22(1)). A person guilty of an offence is liable to receive a fine (regulation 22(3)). Where the offence is committed by a firm, every officer of the firm who is in default also commits the offence (regulation 22(2)).
Under regulations 17 and 18 of the draft Regulations, ACSPs can be given a ‘notice of suspension’ before being given a ‘notice of cessation’ by the Registrar if it has reasonable cause to believe that a person is not a fit and proper person to carry out the functions of an ACSP.
Unique Identifiers
Part 4 of the draft Regulations sets out the new provision for the allocation of Unique Identifiers (UIN) (sections 1082 and 1087 CA 2006, as amended by section 68 ECCTA). A UIN is a unique code ‘consisting of one or more sequences of letters or numbers’ (as per regulation 23(2)) that will be given to all individuals who have had their identity verified (regulation 23(1)), including an ACSP. Individuals must obtain the UIN to confirm that they have had their identity verified and they will only be given one UIN only. This is intended to allow the Registrar to identify individuals delivering documents to the Registrar or to be registered as directors or PSCs on the Companies House database of verified individuals.
Under Regulations 24, if an individual’s identify ceases to be verified, an individual holds more than one UIN or if a new UIN is allocated, the Registrar may discontinue a UIN.
Under Regulation 7, the Registrar must allocate a UIN to an ACSP. This ceases to be allocated to an ACSP if the ACSP ceases to be an ACSP under section 1098F(1) (ceasing to be an authorised corporate service provider) of the CA 2006 or under Regulation 18 (cessation of ACSP status). A notice will be given to the ACSP under Regulation 29(2) that the UIN has ceased to be allocated to it; or a new UIN will be allocated to them (Regulation 30).
Summary
In summary, the draft Regulations demonstrate the importance of individuals having their identity verified to ensure that they are who they claim to be on Companies House and the priority of this scheme for the Government. Companies House reported in their business plan that by the end of March 2025, the Registrar will have introduced the technical capability to undertake IDV. A transition process for a phased rollout is expected to begin in Spring 2025 and beyond. Companies House’s business plan 2024 to 2025 sets out further information regarding implementing the new processes.
As we approach the Autumn season, Companies House announced a significant change – they will move their online services to GOV.UK One Login. This new and secure way to access government digital services offers users a single account, username, and password, eliminating the need to repeatedly submit the same information. As ECCTA requires, users can verify their identity directly through Companies House using the GOV.UK One Login. This change is designed to simplify the process for users.
It is recommended that companies start preparing for the above changes by carrying out suitable checks on those who will require IDV in their organisation and establishing whether their directors and PSCs have the necessary documentation ready to verify their identity. Companies should also gather up-to-date contact details for all directors and PSCs of their company, such as proofs of address and photo ID. It is vital that all directors, PSCs and other registrable entities are notified of the upcoming changes, as continuing to act as a director or PSC without having your identity verified will amount to a criminal offence committed by the company (or disqualification if acting persistently) and every officer will also be punished with a fine by default.
How can Michelmores assist?
It is our intention to become an ACSP so we can support our clients in complying with the new requirements under the ECCTA as and when the relevant provisions come into force. We also continue to monitor the developments and will publish further updates as and when the Government announces new measures.
Michelmores has a dedicated Corporate Services team led by experts in company law and corporate governance. The team will be happy to speak with you if you want to know more about the IDV requirements, ACSPs or how the Companies House reforms or ECCTA will affect your company or organisation. Corporate Services | Michelmores
