Has your practice set up a limited company and are the company records up to date? Be prepared for the new legislative changes for enforcing appropriate record keeping at Companies House
If your practice has set up a limited company, it will be registered at Companies House and these legislative changes will be relevant to you.
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) is to be introduced in March 2024 and will require some changes in Company Law. These include:
- Companies House will have more power to scrutinize information and reject or remove any incorrect or inconsistent information already on the Companies House register
- Efforts will be made to clean up the register by using data matching to identify and remove incorrect information
- Companies House will have enhanced investigation and enforcement powers and will be able to cross check data with other public and private bodies
- Companies must always have a valid registered office address, and using a PO Box as a registered office address will not be allowed
The powers granted to the Registrar under ECCTA are intended to ensure the information contained in the register is accurate and contains everything it ought to contain.
What this means for you
You will need to check exactly who has been issued shares and registered as the shareholder(s) of the company and ensure the current position is reflected at Companies House and in your statutory books. When your practice set up a limited company, the shares must be issued to and registered in the names of the individual partners in order to be legally effective. This information will be recorded in the company's Register of Members (found in the company's statutory books) and you should double check these are up to date. At Companies House, if shareholders hold over 25% of shares this should be recorded as a 'person with significant control' (PSC). You will also need to check that this position is correct at Companies House.
A common issue may be that the practice itself is recorded as the shareholder of the company and as PSC at Companies House or that the shareholdings have changed due to shares being transferred from one partner to another (eg if a partner who was a shareholder, has retired) and this has not been accurately recorded. If so, this will cause problems as legally you either do not have any shareholders which could have a material impact on your business and finances or, the shareholders have not been recorded correctly which is a breach of the Companies Act 2006.
How we can help
If you are unsure who your registered shareholders are, then you should first check the Register of Members. If you do not have your statutory books, you should request these from whoever set up the company and does your company secretarial work such as filing confirmation statements and annual accounts at Companies House. This will most likely be the practice accountants. You can also check the last confirmation statement filed at Companies House to check who is listed as shareholder(s). The confirmation statement and Register of Members should mirror one another.
If you have checked your statutory books or/and Companies House and find the position is incorrect, what can you do? First and foremost - do not panic! The situation is not irrevocable. We have advised on this many times before and can help. By putting in place the appropriate company law remedies, we can get the correct shareholders (and other administrative requirements) registered to the satisfaction of Companies House in line with the new legislation coming into place.
If you get in touch as soon as possible we can make sure that your records are updated, but whatever you do, don't ignore the problem and let an initial small error have a big impact down the line.