Criminal offences relating to the new corporate compliance regime under the Economic Crime and Corporate Transparency Act 2023

With the first tranche of changes under the Economic Crime and Corporate Transparency Act 2023 (ECCTA) having taken effect on 4 March 2024, new criminal offences brought about by ECCTA are also now in force.

Organisations, including companies and limited partnerships, should be live to the new regime and the criminal and civil penalties associated with non-compliance. Charles Mather, solicitor in our regulatory team, looks at some of the criminal offences below.

False statement offences

The preexisting criminal offence committed by a person who knowingly or recklessly provides misleading, false or deceptive information has been expanded to include providing misleading, false or deceptive information without reasonable excuse.

Where the offence is committed by a firm (i.e. any entity, whether or not a legal person, that is not an individual), every officer of the firm also commits the offence, which is punishable by a fine.

A new aggravated criminal offence is committed by a person who knowingly provides misleading, false or deceptive information to Companies House. Where the offence is committed by a firm, every officer of the firm also commits the offence.

The aggravated offence is punishable by a fine or, in the most serious cases, on conviction in the Crown Court, imprisonment for a maximum of two years.

Failure to prevent fraud offence

This new offence, which builds on offences under the Bribery Act 2010 in connection with failure to prevent bribery, applies to ‘large organisations’, including companies and limited partnerships, that satisfy two or more of the following criteria:

• 250 employees;
• £36 million annual turnover;
• £18 million in assets.

An organisation that meets two or more of the above criteria, or its subsidiary, commits the offence if its associate (e.g. an employee, an agent, a subsidiary or a service provider) commits a specified fraud offence with the intention of benefitting the organisation or its customers.

It is a defence if the organisation had reasonable fraud prevention procedures in place in relation to its associates, or it wasn’t reasonable to expect such procedures to be in place.

Specified fraud offences under ECCTA include false accounting, fraudulent trading, false statements by directors, false representation, and fraud by a failure to disclose information. Overseas companies can be liable for prosecution if the fraud was carried in the UK. On conviction in the Crown Court, the maximum penalty is an unlimited fine.

Appropriate address and registered email address offences

 A company that fails, without reasonable excuse, to comply with the new duties under ECCTA to ensure that its registered office address and registered email address are at all times appropriate (i.e. expected to come to the attention of a person acting on behalf of the company), commits, together with its officers, a criminal offence punishable by a fine.

Civil fines

As an alternative to commencing criminal proceedings, Companies House now also has the power to impose civil financial penalties of up to £10,000 for offences under the Companies Act 2006, excluding offences in relation to company secretaries under Part 12, resolutions and meetings under Part 13, and audits under Part 16. Before exercising this new power, Companies House must be satisfied beyond reasonable doubt that the offence has been committed.

What’s next…

Further down the line, new criminal offences and penalties in relation to officers of registrable entities, people with significant control and Authorised Corporate Service Providers (ACSPs), for instance, solicitors and accountants, are expected to be introduced in connection with new identity verification requirements.

With the new identity verification requirements, there will also be changes in relation to filing at Companies House. Only individuals whose identity has been verified or an ASCP will be permitted to file documents. An accompanying statement will also be required, although the required content of the accompanying statement is currently unknown.

The ongoing reforms will place additional compliance burdens on companies and other entities, as well as third parties filing on their behalf.

With the risks associated with falling foul of the new rules, it is important that business owners and other people in positions of seniority are aware of their obligations and seek advice at the earliest opportunity if things go wrong.

Harrison Drury’s Corporate and Regulatory Teams are here to assist you navigate this new regulatory environment.